Nearly half of business owners are still planning to reduce headcounts in response to chancellor Rachel Revers’ £25 billion tax hike on employers’ national insurance contributions (NICs), a new survey has indicated, pointing to the long-lasting economic effects of a brutal tax raid in her first Budget.
Reeves made sweeping tax hikes last year to fund a £190 billion spending splurge on public services, including the NHS and welfare expenditure increases over the next five years. But a new survey by the accounting firm S&W has indicated that the tax raid is still forcing businesses to shed staff one year after the Budget was delivered.
Its research showed that 28 per cent of firms planned further cuts unless the chancellor introduced tax cuts or other forms of relief for employers hiring more workers. Nearly a fifth (19 per cent) said they would reduce staff even if measures were introduced while 19 per cent of all 500 respondents said they had already reduced headcounts due to rise in NICs.
The Office for National Statistics (ONS) has estimated that some 100,000 jobs have been lost over the last year while the unemployment rate has risen from 4.4 per cent to 4.8 per cent.
Bank of England policy makers have also warned that NICs rises have driven up inflation, with the IMF and the OECD forecasting the UK to suffer the highest price growth out of any country in the G7 over the next two years.
Head of consulting at S&W, Clare Burden, said: “It is no surprise that businesses are considering drastic action in response to the increased national insurance costs”. She added: “This is a crunch point for UK businesses. Without meaningful action in the Autumn Budget, we risk seeing a further wave of job losses, scaled back investment and roles moving overseas”.
A record number of small businesses are expecting to shrink or close down in the next year, a leading industry group has warned, amidst a “vicious” cycle of low growth and fears that this month’s Budget could cause more pain for businesses.
A new report suggests nearly one in three of the UK’s small businesses (30 per cent) expect to cut operations, sell up or collapse in the next 12 months, according to the federation of Small Businesses (FSB).
Owners said the November Budget came at a “make-or-break” moment for small firms as net confidence dropped to a -58 in the third quarter of the year, lower than the previous -44 figure and the second lowest reading since the start of the pandemic.
The FSB’s policy chair Tina McKenzie warned the small businesses, often referred to as “the backbone of the UK economy”, faced bigger threats than at other times and required a “positive backing” from the government.
Meanwhile, many businesses are investing heavily in AI without sufficient safeguards for its implementation, a new study by the British Standards Institution (BSI) has found.
While executives are touting AI’s potential to drive productivity, the report suggests that most firms are operating with little more than blind faith in a technology they do not yet fully understand.
The research also found that 62 per cent of business leaders plan to increase AI investments over the next twelve months, citing efficiency and cost savings. But fewer than one in four firms (24 per cent) have an AI governance programme in place. Among larger firms, that figure only rises modestly, to a third.
BSI boss Susan Taylor Martin said: “The business community is steadily building up its understanding of the enormous potential of AI, but the governance gap is concerning”.
She added: “AI will not be a panacea for sluggish growth or low productivity without strategic oversight and clear guardrails. Overconfidence, coupled with fragmented and inconsistent governance, risks leaving many organisations vulnerable to avoidable failures and reputational damage”.
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