A study has shown that Malta is one of five European countries where increases in the minimum wage have failed to keep up with inflation. The other countries are Latvia, Poland, Portugal and, surprisingly, France.

The research by the European Trade Union Institute-Research Education Health and Safety compared the effect of rises in the national minimum wage on workers’ purchasing power.

It shows that Britain’s lowest-paid workers have enjoyed a bigger improvement in their standard of living since 2003 than those in any other European country

It also shows that Gordon Brown and Tony Blair’s decision to introduce a minimum wage has transformed the country from a laggard to a leader in the EU in combating poverty wages.

It has also made Britain a magnet for low-paid workers from parts of Eastern Europe and Portugal where workers’ standard of living has dropped over the past three years.

It showed that since 2003, British workers on the minimum wage had seen their purchasing power rise by 18.8 per cent. This compared with an 18 per cent rise in Spain and 17.4 per cent in Luxembourg.

The minimum wage in the UK is £5.35 an hour for adults, due to rise to £5.52 in October. Britain’s big increase has narrowed the gap between the minimum wage and average wages.

The report showed that the biggest increases in the minimum wage, while not producing such a rise in living standards as the UK, have been in Estonia (39.1 per cent), Slovakia (37.6 per cent) and the Czech Republic (31.2 per cent) – favourites for companies such as Peugeot to relocate production from Britain.

Andrew Watt, a researcher for the study, said: “These results partly reflect Britain’s decision to set a low initial minimum wage and then increase it by a large amount year-on-year.

“But Britain’s decision to introduce a minimum wage has had an impact in other EU countries. Germany is now considering introducing one because of the success in Britain in raising poverty wages.”