Around 1.3 million people on low wages are to secure guaranteed sick pay for the first time in a bid to boost health and living standards, the government has announced.

Those earning less than £123 a week on average will be entitled to a sick pay equivalent of 80% of their weekly salary or the new rate of statutory sick pay (SSP) – due to rise to £118.75 per week in April.

Employers will have to pay whatever the lowest sum is under a compromise achieved following discussions with business leaders – already reeling from a looming hike to minimum wage and employer national insurance contributions announced in October’s budget.

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The new sick pay policy is expected to take effect next year but, crucially, it will apply from the first day of sickness rather than after the third consecutive day.

The government argues that the measure will keep more people off benefits and leave some up to £100 better off per week because they will remain in employment.

Work and Pensions Secretary Liz Kendall said: “For too long, sick workers have had to decide between staying at home and losing a day’s pay, or soldiering on at their own risk just to make ends meet.

“No one should ever have to choose between their health and earning a living, which is why we are making this landmark change.

“The new rate is good for workers and fair on businesses as part of our plan to boost rights and make work pay, while delivering our plan for change.”

Unions had argued for an even higher figure.

The British Chambers of Commerce welcomed the outcome of the talks but said its members were still set to face further additional costs arising from the policy shift – on top of the budget measures due to take effect this April.

Jane Gratton, its deputy director of public policy, said: “Employers often struggle to find shift cover at short notice, leading to disruption for customers.

“The government’s impact assessment did not produce compelling evidence on the day-one rights issue, so there may yet be unforeseen consequences.”

The announcement was made as MPs debate the wider employment rights Bill amid reports the government could drop its commitment to a ‘right to switch off’ outside of working hours.

The Sunday Times also reported at the weekend that a series of amendments was likely to be tabled by ministers as part of government efforts to keep business sweet following a brutal backlash to the budget.

Business groups have argued that the £25bn annual hit from the employment tax measures will result in job cuts, poor pay awards and weaker investment – hitting the government’s growth agenda.

Rachel Suff, wellbeing adviser at the HR body CIPD, said of the additional sick pay plans: “Phasing in elements of the Employment Rights Bill and ensuring sufficient support and guidance for employers will be vital to making sure these measures work for employers and employees.”

Weapons companies’ share prices surged across Europe and the UK’s benchmark stock index reached a record high amid talks of increased defence spending.

The FTSE 100 index of the most valuable companies on the London Stock Exchange hit a level never seen before as arms maker BAE Systems saw its share price rise as much as 17.5% on Monday to its record high.

That share price rise added about £5.92bn to the company’s total value on Monday from the close on Friday afternoon.

Also boosting the FTSE 100 to a never-before-seen level was defence and aerospace firm Rolls-Royce Holdings whose stocks rose 6% at one point on Monday.

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Elsewhere on the London Stock Exchange, the bigger FTSE 250 index comprising more British companies was also raised by the anticipated growth in weapons spending.

Its biggest risers were defence technology company QinetiQ and defence support business Babcock International, which climbed 10.3% and 9.3% respectively.

It was not just British arms businesses given a lift, across Europe stocks in such companies were on the up.

A Europe-wide phenomenon

Shares of Germany’s largest defence company Rheinmetall jumped 18% while Italy’s Leonardo was up 15%.

Expectations of more defence spending rose after European leaders got together in London to discuss greater funding for Ukraine in its fight against Russia and a possible EU-backed peace deal.

Why?

Prime Minister Sir Keir Starmer announced on Sunday a loan to Ukraine and a £1.6bn deal for a Belfast factory to supply missiles for the country’s fight against Russia.

Mr Starmer had suggested a coalition of European and other allies could defend a potential deal for Ukraine to “guarantee the peace” and increase military spending to do so.

He made the comments at a summit of EU leaders, along with Canada and Turkey, which had been planned for more than a week but took on urgency following the disastrous meeting and diplomatic breakdown between President Donald Trump and Volodymyr Zelenskyy at the White House on Friday.

The UK had already announced it would increase military spending to 2.5% of GDP – a measure of everything produced in the economy – by 2027.

Chancellor Rachel Reeves had also announced an extra £2.26bn for the Ukrainian war effort, funded by the profits made from hundreds of billions of dollars worth of Russian sovereign assets frozen since the start of the full-scale war in February 2022.

The private equity backer of the technology company previously known as UKFast is exploring a sale that it hopes will fetch a £400m price tag.

Sky News has learnt that Inflexion, the buyout firm, has hired investment bankers to orchestrate a sale of ANS, which provides cloud hosting services to corporate customers.

UKFast was rebranded as ANS in the wake of revelations in the Financial Times in 2019 about the conduct of UKFast’s founder, Lawrence Jones.

Mr Jones was convicted of rape and sexual assault in 2023, and was sentenced to 15 years in prison.

In December, he was stripped of his MBE, which had been awarded for services to the digital economy in 2015.

Arma Partners is understood to have been hired to advise on the sale of ANS, which was acquired by Inflexion in 2021.

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ANS was founded by Scott Fletcher, a former child actor who appeared in television shows such as Casualty and Jossy’s Giants.

The combined group, which is based in Manchester, is expected to be worth between £300m and £400m, according to banking sources.

Prospective bidders are expected to include other private equity firms.

Inflexion declined to comment.