Government must ‘take its head out of the sand’ after jobs plunge
Small businesses have urged the government to “take its head out of the sand” over tax hikes and a flurry of fresh employment regulations after the Office for National Statistics reported another consecutive month of jobs losses.
Responding to Thursday’s unemployment figures, the Federation for Small Businesses said the jobs plunge was “disturbing” and that it “add[s] to a weight of evidence that if you make it more expensive and riskier to give someone a job, the result will be fewer jobs.”
“Ramping up jobs taxes, pushing through 28 new bits of employment legislation, and then on top of that mooting a hike in employer pension costs, is not a recipe for job-creation and economic growth,” said FSB chair Tina McKenzie.
“Innovative, ambitious and compassionate small employers, who want to grow and create good opportunities for people, are absolutely up against it, with sky-high costs of doing business and a stagnant economy.
“Ministers should start basing policy-making on real-world evidence, including today’s official figures, rather than being swayed by well-intentioned, but misguided, wishful-thinkers.”
The estimate of employees on the payroll dropped by around 41,000 in June, according to ONS data, while the unemployment rate grew to 4.7 per cent, a four-year high.
In the year to June, some 178,000 people were pushed out of work. The unemployment rate just two months ago was 4.4 per cent.
The ONS also estimated that the number of vacancies in the UK fell by 56,000 in three months to 727,000, the 36th consecutive period where vacancy numbers have fallen.
Employment rights changes spark small business concerns
Despite rising unemployment, the government is pushing ahead with its Employment Rights Bill, which will include measures like banning “exploitative” zero-hours contracts – which retailers have described as essential for managing seasonal demand – and so-called ‘fire and rehire’ practices, as well as contentious changes to statutory sick pay (SSP) and a host of new ‘rights from day one’.
Research by the FSB found that twice as many small businesses shed staff in the second quarter of 2025 (20 per cent) than increased their employee numbers (9 per cent), with similar numbers predicted for the next three months.
For the first time in the 15-year history of FSB’s quarterly Small Business Index, more small businesses (27 per cent) expect to shrink or close over the next 12 months than the number (25 per cent) which expect to expand.
“That’s more than alarming for the economy and the communities up and down the UK in which these hard-working businesses operate,” McKenzie said.
“There is some very clear writing on the wall. The Government must, collectively, take its head out of the sand and read it.
“That includes improving the worst aspects of the planned employment legislation, supporting small employers to make rises in statutory sick pay affordable, and creating the conditions in which it’s attractive for talented, aspirational people to start their own business.”