UK employers are preparing for what could be the biggest round of layoffs in a decade. Surveys conducted by the Chartered Institute of Personnel and Development (CIPD) indicate that redundancy intentions have reached their highest levels in ten years, excluding the pandemic period. This steep decline in business confidence is largely attributed to the anticipated tax increases outlined in Rachel Reeves’ autumn budget, set to come into force in April, which many firms fear will squeeze their bottom lines further.
Rising Costs and Employment Uncertainty
Employers are citing rising employment costs as a major factor driving their plans to cut jobs. In particular, the increase in employer national insurance contributions and the 6.7% rise in the national living wage have significantly impacted the cost of labor. Nearly one-third of the employers surveyed indicated plans to reduce their workforce or slow down recruitment as a response. These measures are being implemented at a time when broader economic indicators suggest that the UK economy is under strain, with inflation and unemployment both expected to rise in the coming months.
Impact on Small Businesses
The slump in business sentiment is not confined to large corporations. A separate survey by the Federation of Small Businesses (FSB) shows a dramatic drop in confidence among small firms across all sectors, with none recording a positive score. Particularly hard-hit are sectors like accommodation and food services, where sentiment has plummeted to historically low levels. Many small business owners express concerns about further tax increases and the forthcoming employment rights bill, which they fear could impose additional financial burdens and complicate their operational strategies.
Political and Economic Implications
The mounting pressure on businesses poses a significant challenge for the government. Critics argue that the measures announced in the autumn budget, which are projected to add around £650 million in costs for sectors like hospitality, could derail the government’s economic growth agenda. Backbench Labour MPs and industry bodies, including the BBPA, have voiced concerns that these fiscal pressures will lead to increased redundancies and hamper efforts to stimulate economic growth. The Treasury, however, defends its approach, insisting that the budget was designed to deliver stability and boost investment, with measures to protect working people’s pay and reduce national insurance costs for most employers.
A Pivotal Moment for UK Business
As the UK heads into 2025, the outlook for businesses remains uncertain. With inflation expected to rise from 2.5% to 2.8% and the unemployment rate edging up, many companies are taking a cautious approach by planning for workforce reductions, raising prices, and curbing investment in training. The combination of higher operational costs, economic uncertainty, and potential policy shifts is creating a perfect storm that may force many UK employers to make difficult decisions about their future workforce.
