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UK Hiring Plummets to Pandemic Levels Amidst National Insurance Hike
British employers have significantly reduced recruitment to levels not seen since the pandemic’s onset, as Chancellor Rachel Reeves’s £25 billion National Insurance increase begins to impact businesses. According to a survey by the British Chambers of Commerce (BCC), only 20 percent of companies expanded their workforce in the first quarter of this year. This marks the weakest hiring rate since the initial months of 2021, raising concerns about the current economic climate and job market trends.
Business Leaders Warn of Economic Repercussions
Prominent business figures have voiced apprehension that the surge in employer taxes could trigger job losses, wage stagnation, and increased consumer prices throughout the year. The BCC’s comprehensive survey, encompassing over 5,000 firms, further indicated that 17 percent of businesses downsized their teams during the same period.
Major Companies Implement Job Cuts
Several prominent firms, including Sainsbury’s, Tesco, BT, and Santander, have already implemented job cuts following last year’s fiscal budget announcements. Concerns are mounting that further reductions may be on the horizon after the rise in employer National Insurance contributions took effect recently. This increase elevates the employer’s rate from 13.8 percent to 15 percent.
Impact of National Insurance Changes
While the Chancellor also lowered the threshold for National Insurance payments – from £9,100 earnings to £5,000 – criticism has emerged. Experts caution that this “jobs tax” could disproportionately affect part-time employees, making their employment comparatively more expensive for businesses.
Concerns Over Employment Rights Bill
Business owners also express worries that the Government’s proposed Employment Rights Bill will further complicate the processes of hiring and retaining employees, adding to the existing challenges in the labor market.
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Rising Costs Pressure Businesses to Increase Prices
Consumers are also likely to feel the strain, as a significant 73 percent of surveyed firms informed the BCC that elevated operational costs are creating pressure to raise the prices of goods and services.
BCC Deputy Director’s Assessment
Jane Gratton, the Deputy Director for Public Policy at the BCC, commented on the findings, stating: “Companies are struggling under the strain of skills gaps, recruitment challenges, and escalating employment expenditures. There are clear indications of businesses pausing hiring plans, reducing investments in training, and, in certain instances, decreasing their workforce size. The potential consequences for job opportunities and overall business expansion are cause for concern.”
She further added, “Firms are contending with increased expenses stemming from both the rise in employer National Insurance contributions and the minimum wage. The complete ramifications of these changes are not anticipated to be fully apparent until later in the year.”
Political Response to Hiring Slowdown
Andrew Griffith, the Tory business spokesperson, sharply criticized the current administration, stating: “As if further evidence were needed, this data unequivocally demonstrates to the Government that their jobs tax and impending additional regulatory burdens on employers are freezing the job market at an alarming rate.”
Griffith urged the opposition, stating, “Starmer must adopt a serious approach to economic growth, beginning by discarding Labour’s detrimental Employment Rights Bill.”