The recent increase in National Insurance contributions poses a significant threat to the UK’s hiring rebound.
The employment index from BDO showed a slight rise from 95.45 points in September to 96 points in October, marking a reversal after a 15-month decline.
UK businesses are warning of potential job cuts and price increases due to the extra costs imposed by Rachel Reeves’ autumn budget.
Allison Kirkby, chief executive of BT, said the company faces a £100m hit from rising national insurance contributions.
Sainsbury’s Simon Roberts highlighted that the national insurance increase could cost the supermarket an additional £140m next year.
Shevaun Haviland from the British Chambers of Commerce described the new tax regime as “a tough budget for business to swallow.”
Recent figures from the Office for National Statistics (ONS) indicate a troubling trend in the UK’s employment market, with the unemployment rate rising to 4.3% in the three months to September, up from 4% previously. Job vacancies fell by 35,000 to 831,000, marking a continued decline over two years.
Alexandra Hall-Chen from the Institute of Directors expressed concern over employers’ cautious hiring intentions due to recent policy changes.
Already it has been announced that the number of British businesses facing insolvency has surged, with 1,022 companies filing for insolvency last week, marking a 64% increase compared to the same period last year.
Some of this is being attributed to the Chancellor’s recent decision to reduce tax breaks, specifically the business asset disposal relief, which previously allowed entrepreneurs to benefit from a lower capital gains tax rate of 10% on gains up to £1m.
Starting from April 6, 2025, this rate will increase to 14%, and further to 18% from April 6, 2026. As a result, many entrepreneurs are feeling the pressure, with the Chancellor’s changes prompting significant concern within the business community.
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