Paying the Living Wage rather than the statutory minimum would only cost 1.3% of the national wage bill and bring in £4.5 billion in taxes and reduced benefit payments, according to a new study.

KPMG said it had calculated for the first time the impact of adopting the higher rate of £7.85 an hour (£9.15 in London), compared with the adult national minimum wage of £6.50.

The professional services firm said companies that adopted the Living Wage had reported "clear benefits" to their businesses.

KPMG, which pays the Living Wage to its staff and contractors, said it had benefited from lower absence rates and a more engaged workforce.

Marianne Fallon, head of corporate affairs at KPMG, said: "We firmly believe that voluntary adoption of a Living Wage policy by employers, over time, is one of the tools that will help improve social mobility in the UK as well as directly addressing in-work poverty.

"We understand that this is a complex issue for employers and policymakers, but our research shows that there is more to be gained by employers adopting a Living Wage strategy integrated within their broader business strategy."

Higher pay tends to motivate staff and help with costs such as childcare, said the report.

There has been speculation that the Budget on Wednesday could raise the prospect of incentives for companies paying the Living Wage.