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UK Employers Reduce Hiring to Pandemic Lows Amidst National Insurance Increase

British companies have significantly reduced hiring, reaching levels not seen since the pandemic’s onset, as the increase in National Insurance contributions impacts businesses. A survey reveals that only 20 percent of firms expanded their workforce in the first quarter of this year, marking the weakest growth in job creation since early 2021. This slowdown in employment comes as business leaders voice concerns over the rising costs and potential for economic repercussions.

Hiring Slowdown Amidst Rising Costs

The British Chambers of Commerce (BCC) survey, encompassing over 5,000 firms, indicated a notable decrease in recruitment. The findings show a sharp contraction in hiring, with business leaders warning that increased employer taxes could lead to adverse consequences including potential job losses, suppressed wage growth, and rising prices for consumers throughout the year.

Adding to the concerning economic outlook, the survey also highlighted that 17 percent of businesses reduced their staff numbers during the same three-month period, further underscoring the challenging employment landscape.

Impact of National Insurance Hike

Several prominent companies, such as Sainsbury’s, Tesco, BT, and Santander, have already announced job cuts following last year’s budget. The recent increase in employer National Insurance contributions, which took effect on Sunday, has heightened anxieties about further job reductions across various sectors.

The National Insurance hike has elevated the employer contribution rate from 13.8 percent to 15 percent. Compounding the financial strain, the threshold at which employers begin paying this tax has been lowered, from earnings of £9,100 down to £5,000.

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Concerns have been raised that this ‘jobs tax’ will disproportionately affect part-time employees, making them a more expensive segment of the workforce to employ.

Business Leaders Express Concerns Over Employment Rights Bill

Business executives are also worried about the potential impact of the Government’s proposed Employment Rights Bill. They fear that the legislation could create additional hurdles in the recruitment and retention of employees, further complicating business operations and growth.

Consumer Impact and Price Pressures

The strain on businesses is likely to extend to consumers, as the survey data suggests. A significant 73 percent of businesses reported that escalating costs are creating pressure to increase prices for goods and services.

Jane Gratton, Deputy Director of Public Policy at the BCC, commented on the findings, stating, ‘Companies are struggling amidst skills shortages, difficulties in hiring, and escalating employment expenditures.’ She further noted, ‘There are indications that businesses are pausing hiring plans, reducing investments in training, and, in some instances, decreasing their workforce size. The potential consequences for job opportunities and business expansion are concerning.’

Gratton added, ‘Firms are encountering higher expenses due to the rise in both employer National Insurance contributions and the minimum wage. The complete ramifications will become clearer later in the year.’

Andrew Griffith, Tory business spokesman, criticized the government’s policies, saying, ‘This data provides further evidence that the Government’s jobs tax and forthcoming additional bureaucracy on employers are stifling the jobs market at an alarming rate.’

Griffith urged the opposition, stating, ‘Starmer needs to address economic growth seriously, starting by abandoning Labour’s detrimental Employment Rights Bill.’

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