The impact of Rachel Reeves’s Budget tax raid on businesses was revealed today by two surveys showing a sharp slowdown in recruitment ahead of higher national insurance contribution rates kicking in for employers.
Data from accountancy firm BDO showed private sector recruitment slumped to its lowest since November 2012. Meanwhile separate findings from researchers at the Recruitment and Employment Confederation (REC) and another professional services firm KPMG showed the smallest number of vacancies since August 2020 in the middle of the pandemic.
This sharp fall was particularly pronounced for permanent staff, with the rate of contraction accelerating for the fifth consecutive month. Temp billings also fell at a steep and accelerated rate in January. The contraction was the sharpest since June 2020
Jon Holt, KPMG’s group chief executive and UK senior partner KPMG, said: “Businesses continue to hold back on recruitment, leading to permanent and temporary placements falling steeply again in January.
“While firms are still willing to pay for top talent, increased staff availability weighed on pay growth. This cooling may have encouraged the Bank of England’s decision to cut rates last week.”
Kaley Crossthwaite, partner at BDO, said: “The new year is often time for a refresh, but businesses across the UK are continuing to face challenges that have weighed on them for months.”
He warned it was “unlikely that we will see any significant improvement” over the coming months.
Private sector employers have expressed dismay at the higher NICS contributions they will have to pay from April. The Chancellor announced in the October Budget that the NIC rate for employers will go up from 13.8% to 15% while the threshold at which they have to be paid will fall from £9,100 to £5,000. The move will raise close to £25 billion a year for the Treasury by 2030.
Today Marks & Spencer chief executive Stuart Machin has called on the government to take “immediate action” and “lighten the burden that the Budget loaded on to the retail sector.” Retail is one of the sectors likely to be worst affected by NIC raid as it employers hundreds of thousands of relatively low paid and part-time workers.
Machin also said retailers are being “raided like a piggy bank” as the sector tries to cope with rising taxes.
A panel of employers consulted by KPMG and REC “reported unease amongst firms to hire staff, linked to economic uncertainty and the government’s changes to national insurance and employment rights legislation.”
Unemployment remains at a historically low rate of just 4.4 per cent but has been rising slowly over the past year while the number of vacancies has been steadily dropping, according to official figures from the Office for National Statistics (ONS). Andrew Griffith, the shadow business and trade secretary, said: “The Conservatives warned that Labour’s national insurance jobs tax and economic mismanagement would kill growth stone dead, putting countless jobs at risk. These reports are deeply concerning, “
