Employer confidence slides ahead of NI, minimum wage increases
By Josh White
Date: Monday 17 Feb 2025
(Sharecast News) - Employer confidence in the UK had weakened significantly, according to fresh industry research released on Monday, with businesses increasingly planning job cuts and scaling back investment in response to rising employment costs, according to the Chartered Institute of Personnel and Development (CIPD).
The CIPD said a survey of over 2,000 UK employers found that hiring intentions had declined sharply, while redundancy plans have surged to their highest level in a decade outside of the pandemic.
It said the primary concerns stemmed from the upcoming rise in employer National Insurance contributions (NICs) and the increase in the National Minimum Wage, both announced in the October 2024 Budget.
The industry body said the report showed that nearly one-third of businesses expecting higher employment costs planned to reduce their workforce through redundancies or by slowing recruitment.
Additionally, 42% intended to pass on costs by raising prices, and 24% were cancelling or scaling back expansion plans.
The pressures had reportedly contributed to a sharp drop in the survey's net employment balance - a measure of hiring confidence - which fell from +21 last quarter to +13, with the private sector seeing a drop from +24 to +16.
Sector-specific declines were particularly pronounced in retail, where the net employment balance fell from +23 to +1, and in hospitality, which saw a drop from +18 to +7.
The construction sector, critical to the government's infrastructure plans, also saw hiring confidence weaken, declining from +43 to +27.
Meanwhile, overall redundancy plans had increased, with 25% of employers expecting to cut jobs in the three months to March 2025, up from 21% last quarter.
The rise was reportedly more acute in the private sector, where the figure jumped from 22% to 27%.
Concerns over rising costs were widespread, the CIPD said.
Nine in 10 employers expect their overall employment costs to rise due to NIC changes, with 43% saying the increase in NIC rates would have a significant impact.
A quarter of businesses also anticipate a major financial strain from the National Living Wage increase to £12.21 per hour.
"These are the most significant downward changes in employer sentiment we've seen in the last 10 years, outside of the pandemic," said CIPD chief executive Peter Cheese.
"Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction.
"Businesses have had time to digest these impending changes, with many now planning to reduce headcount, raise prices and cut investment in workforce training."
Cheese said that if the government's plans were to succeed, it was "vital" they set out how they would help businesses to support growth and investment.
"And it's important this support is felt across the economy.
"Our data shows it's the everyday economy sectors, such as retail and hospitality, which employ large numbers of people, that will be particularly affected by impending increases to employment costs."
In response to the pressures, the CIPD said many employers were taking steps to offset costs.
Besides raising prices, 37% were apparently focusing on improving efficiency and productivity, while 21% plan to accelerate automation.
Some businesses were also cutting back on workforce development, with nearly one in five reducing training budgets, a move that could further exacerbate skills shortages.
Despite the concerns, the survey found some optimism in the public sector, where 58% of employers believed additional government funding from tax increases would help improve recruitment, and 56% expected it to aid retention.
However, overall wage growth expectations remained stable, with median pay rises forecast at 3% in the private sector and 2.5% in the public sector for the coming year - down from 4% last quarter following government pay announcements in July.
Reporting by Josh White for Sharecast.com.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN