HUNDREDS of thousands of businesses are planning to lay off workers due to the hike to employers' National Insurance contributions (NICs), surveys have shown.
Redundancies and unemployment are expected to increase as a result of Chancellor Rachel Reeves's October Budget which included a £25 billion rise to employers' NICs, The Times has reported.
An employment index compiled by the consultancy BDO slid to 94.30 in February from 94.72, towards levels last seen in the aftermath of the 2008 global financial crisis.
Separate figures from KPMG and the Recruitment and Employment Confederation (REC) showed that vacancies had contracted at the second fastest pace in nearly five years last month and wage growth slowed to a four-year low.
To add to pressure on businesses, from early April the minimum wage will rise by 6.7% while the main rate of employers’ NICs will rise to 15% from 13.8.%.
Reeves also lowered the earnings threshold that triggers employers’ NICs to £5000 from £9100.
Kaley Crossthwaite, partner at BDO, said: “Business growth is happening, but it is in a fragile state.”
Neil Carberry, chief executive of the REC, described hiring as slow owing to companies “holding their breath in the face of significant costs rises from April with changes to national insurance and the national living wage”.
Research from the lender Iwoca found that more than 300,000 small business owners intended to sack staff to cope with the national insurance increase.
Later this month in the Spring Budget, Reeves is expected to make sweeping cuts to welfare spending. New forecasts from the Office for Budget Responsibility on March 26 will reveal that her £9.9 billion of fiscal headroom has disappeared owing to weaker-than-expected economic growth and a sharp rise in government borrowing costs.
She has been accused of “punching down” on some of the poorest in society with the plans.
Reeves has spoken about the cuts in terms of giving people “support to get back to work” but she has not ruled out making it harder for sick and disabled people to claim personal independence payments.
An HM Treasury spokesman said: “Lloyds Banking Group reported last month that business confidence is at a six-month high. Since the general election, there have been three interest rate cuts, real wages are rising at the highest level in six months and working people’s payslips have been protected from high taxes. The world is changing. That’s why the government is going further and faster to deliver our Plan for Change to kickstart economic growth and put more money in people’s pockets.”
