Job Cuts Loom as Rising Employment Costs Squeeze UK Firms

In light of impending increases to National Insurance contributions and wages, many UK companies are planning to reduce their workforce or slow hiring rates, as revealed by a recent survey conducted by the Chartered Institute of Personnel and Development (CIPD). Approximately one-third of 2,000 employers surveyed indicated intentions to cut jobs or hire fewer employees, with 42% of firms considering price hikes to offset rising employment costs. The Federation of Small Businesses noted a significant drop in confidence among small businesses, marking the lowest levels in a decade (excluding the pandemic).

The planned National Insurance increases will raise employers’ contributions from 13.8% to 15% for salaries exceeding £5,000, effective April. Additionally, the National Minimum Wage will see a rise, leading many firms to cancel or reduce investment plans. The downward shift in employment sentiment follows alarming reports from the British Chambers of Commerce, which also documented a slump in confidence among their members, and industry warnings about inevitable job losses on the High Street due to rising costs.

Despite some major retailers reporting substantial profits—like Next, which made over £1 billion last year—there are concerns that tax increases will negatively impact economic growth and employment rates. The government’s position insists these rises are necessary for public service funding and rectifying shortcomings in public spending, a consequence of previous Conservative leadership.

Recent statistics indicated a marginal increase in the UK unemployment rate to 4.4% in November. Critics of the government’s strategy argue such fiscal measures could stifle hiring, with the risk that businesses passing increased costs onto consumers could exacerbate inflation, projected to spike at 3.7% later this year. However, the Bank of England’s governor noted a gradual easing of inflation pressures, indicating a hopeful outlook for economic stability despite prevailing uncertainties.