Labour’s £25bn employer national insurance raid prompts ‘paralysed’ bosses to stall hiring new staff, damning figures show_Nhy
Businesses have been left ‘paralysed’ as Labour’s £25bn employer national insurance raid prompts them to stall hiring plans, new figures show.
The report from recruitment firm Manpower said intentions to take on more staff at the start of the new year were ‘stagnant’ just as they were after the pandemic.
It comes after Chancellor Rachel Reeves hiked the employer NI rate from 13.8 per cent to 15 per cent and slashed the threshold for paying it from £9,100 to £5,000.
The shock decision has prompted an outcry from businesses and evidence is already emerging that it is dampening economic growth and could deter new jobs from being created.
Michael Stull, managing director of Manpower Group UK, said: ‘Businesses have been paralysed by the recent Budget announcement, just as they were post-Covid.
‘There is a strong appetite to grow, but the new government’s actions have thrown the labour market into yet another period of uncertainty.
‘Businesses have been waiting to see signs of the economy kicking into gear, but the government has yet to give business the confidence to go ahead with plans for growth.’
Analysis by Manpower showed the NI hike could cost employers as much as 33 per cent more for each lower wage worker from next April when it comes into force.
Businesses have been left ‘paralysed’ by Rachel Reeves’ decision to hike the employer NI rate from 13.8 per cent to 15 per cent and slash the threshold for paying it from £9,100 to £5,000, new data shows
The report from recruitment firm Manpower said intentions to take on more staff at the start of the new year were ‘stagnant’
And the report predicted that it will mean wage growth declining next year as the higher costs are passed on directly to employees.
Manpower’s survey of more than 2,000 firms showed a balance of hiring confidence – subtracting the proportion planning to cut staff in the first quarter of 2025 from those planning to hire – stood at a positive 28 per cent.
But it was unchanged from the previous quarter suggesting that instead of the Budget unleashing growth, it had left employers stuck in a ‘wait and see’ pattern.
The poll echoes separate findings yesterday from the Recruitment and Employment Confederation (REC) showing a sharp decline in companies hiring new workers as they digested their higher costs.
That is unlikely to boost confidence among households worried about their jobs and wages.
And separate figures yesterday showed homeowners are already grappling with higher mortgage rates in the wake of the Budget.
They showed the average rate for a five-year fixed rate deal has just seen its sharpest jump for more than a year.
It went from 5.09 per cent at the start of November to 5.28 per cent at the beginning of December.
Mortgage rates are increasing as financial markets are betting that the Bank of England interest rate will take longer to come down than previously expected (file photo)
That is the biggest month-on-month increase since August last year.
Mortgage rates are going up because financial markets are betting that the Bank of England interest rate will take longer to come down than previously expected.
That is partly because Rachel Reeves’s Budget spending and borrowing spree is likely to add to inflation pressures, making the Bank less keen to cut rates.
Higher mortgage rates pile further pressure on first-time buyers already struggling to get on the housing ladder.
Figures yesterday from the Office for National Statistics (ONS) showed the typical value of a home in England last year, at £298,000, was 8.6 times the average annual disposable household income.
The equivalent figure for Wales was 5.8, for Scotland 5.6 and Northern Ireland 5.0.
Since 1999, house prices have increased twice as quickly as household incomes in England, the ONS report said.
That means the average-priced home is now ‘unaffordable’ – meaning it costs more than five years of income – for all but the 10 per cent highest income households in England.
