Business groups warn of jobs market slowdown following Budget
Business groups have warned that the government’s national insurance hike will “stifle job creation” in the months ahead after new figures pointed to growing slack in the labour market.
Figures released by the Office for National Statistics (ONS) showed that the number of paid employees fell by 5,000 in October, the fifth monthly fall in seven months, while vacancies fell for the 28th consecutive period.
The unemployment rate picked up to 4.3 per cent, from 4.1 per cent previously, although there is significant uncertainty over the accuracy of the figures.
Alexandra Hall-Chen, principal policy adviser for employment at the Institute for Directors (IoD), said the figures point to a “concerning trend” in the labour market.
She warned that many government policies—such as the national insurance increase, the employment law overhaul, and the minimum wage hike—would contribute to a slowdown in hiring in the months ahead.
The government’s own estimates suggest that the new employment laws will place an additional £5bn cost burden on businesses while many businesses have warned about the extra costs of the national insurance hike.
Jobs market set to take a hit
According to an IoD survey, a higher proportion of business leaders are expecting to reduce their headcount than increase it for the first time since October 2020.
“The cumulative effect of these changes will ultimately be to stifle job creation,” she said.
Matthew Percival, future of work and skills director at the Confederation of British Industry (CBI), similarly warned that the government’s measures would contribute to “spiralling employment costs”, which ultimately impact growth.
“When margins are squeezed too far, employers lose the headroom to pursue growth and a growing number are facing difficult decisions between cutting either investment or jobs,” he said.
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, urged the government to “minimise the combined impact” of the policy changes.
“We need urgent action to drive growth, tackle the skills crisis, boost workforce health and reduce inactivity in the labour market,” she said.