A quarter of UK employers plan to make redundancies before Budget tax increases bite in April, according to a survey that will reinforce fears of a sharp downturn in the jobs market.
The poll by the Chartered Institute of Personnel and Development found that two-fifths of employers expected the increase in national insurance contributions announced in October’s Budget would increase their costs “to a large extent”, with many also set to be hit by the rising minimum wage and higher business rates.
Of the employers who responded, 25 per cent planned to make redundancies — the highest level since 2014, except during the pandemic — while 16 per cent expected their total staff level to decrease in the three months to March, up from 11 per cent in the previous quarter.
Among those who expected staffing costs to rise, a third planned to respond by cutting headcount, either through redundancies or by recruiting fewer workers, a quarter planned to reduce overtime and bonuses, while a fifth planned to squeeze basic pay and cut training. A quarter are scaling back investment or expansion plans.
Peter Cheese, chief executive of the CIPD, said the survey showed “the most significant downward changes in employer sentiment we’ve seen in the last 10 years” barring the pandemic, with the biggest impact being felt in “the everyday economy sectors, such as retail and hospitality, which employ large numbers of people”.
The CIPD’s report is the latest in a string of gloomy surveys reflecting worries over looming tax increases, stagnant economic activity and growing global trade tensions.
A separate survey published on Monday by the Federation of Small Businesses also showed confidence among small companies plumbing new lows, with a quarter of respondents expecting their business to shrink in the first three months of 2025.
The findings will reinforce fears voiced last week by Catherine Mann, an external member of the Bank of England’s Monetary Policy Committee, that the Budget tax increases had “dramatically changed” the employment plans of the companies set to be hardest hit.
She warned this could lead to a sudden, “non-linear” weakening in a labour market that had so far proved relatively resilient, despite a six-month period of near-stagnation in GDP.
The CIPD survey shows big divides, however, between the low-wage sectors most affected by the tax changes, where employers are cutting back sharply, and others where skills shortages are still widespread.
The share of employers expecting to cut headcount has risen fastest in retail, hospitality and leisure, as well as in transport and storage, and support services, the CIPD said.
One in 10 employers in construction also expect staff levels to fall — despite the government’s announcement of big infrastructure and housebuilding plans. But with many construction companies still finding it difficult to fill vacancies, employers in this sector were more likely to turn to automation than to lay workers off as staffing costs rose.
James Cockett, senior labour market economist at the CIPD, said the cutbacks to investment and training were especially troubling, as it would have “longer-lasting impacts, creating skills gaps and making the UK a less attractive place to invest”.
