Firms plan job cuts as employment costs rise

A survey of UK employers reveals that many companies are planning layoffs or reduced hiring due to upcoming National Insurance contributions and wage increases. The Chartered Institute of Personnel and Development (CIPD) conducted a questionnaire survey of businesses, which showed that companies will also raise product prices to offset rising employment costs. These findings suggest that businesses are taking a cautious view of the future economic outlook.

Another study by the Federation of Small Businesses found that small business confidence fell to a ten-year low in the last three months of last year, excluding the period of the COVID-19 pandemic. The Small Business Index, which measures the level of business confidence, found that small companies "expect their business size to shrink in the first three months of 2025." These warnings echo growing complaints about planned increases in National Insurance contributions and the minimum wage.

The CIPD survey showed that just over a third of the 2,000 companies surveyed said they planned to reduce headcount through layoffs or reduced hiring. About 42% said they would raise prices, while a quarter said "they are canceling or scaling back plans to invest or expand their business." CIPD Chief Executive Peter Cheese said this was "the most significant decline in employer sentiment in the past 10 years, excluding the pandemic."

The Treasury Department says it is providing businesses with the stability they need to invest and grow. The government says the increase is necessary to fund public services and address a "black hole" in public spending plans. The government claims this was inherited from the Conservative Party. The Treasury told the BBC that it had delivered a "Parliamentary budget to clear obstacles and provide businesses with the stability they need to invest and grow, while protecting working people's payroll from higher taxes, ensuring that more than half of employers see a cut or no change in their National Insurance bills, and providing millions of workers with record wage growth."

The latest data from the UK Office for National Statistics (ONS) shows that the UK unemployment rate rose slightly from 4.3% to 4.4% in November. The latest labor market situation will be released on Tuesday. However, due to low response rates to employment surveys, the ONS advises caution when interpreting its recent data. The latest inflation data - measuring the rate of price increases - will be released on Wednesday. If companies raise prices in the face of increased employment costs, it could lead to a further rise in inflation in the coming months. The Bank of England has previously warned that inflation is expected to peak at 3.7% later this year and will take longer to fall back to the 2% target.