The UK employment sector is facing its biggest wave of redundancies in ten years as businesses struggle with mounting costs and economic uncertainty. Employers are reassessing hiring plans in response to rising National Insurance contributions, an increased National Living Wage, and broader economic pressures.
With unemployment now at 4.4%, experts warn that immediate action is required to support businesses and prevent further job losses. The warning comes as firms prepare for tax increases outlined in the Chancellor’s recent fiscal plans.
Business leaders have expressed concerns over the growing cost of employment and its impact on hiring, investment, and overall economic stability.
Rising Employment Costs Drive Uncertainty
UK businesses are facing a combination of rising labour costs and slowing economic growth, leading to caution in hiring and investment. According to Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, the current business confidence in hiring is at levels last seen during the early stages of the COVID-19 pandemic.
“The cumulative impact of recent employment reforms, coupled with upcoming increases to employer National Insurance Contributions and the National Living Wage, is significantly weakening the business case for hiring,” Hall-Chen stated.
The rise in employment costs is forcing some firms to reassess their workforce strategies. According to James Cockett, Senior Labour Market Economist at the Chartered Institute of Personnel and Development (CIPD), some employers are delaying hiring and training plans, while others are turning to automation or other cost-saving measures.
Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce, described the situation as a “continuing headache” for employers. She warned that businesses will find it increasingly difficult to absorb these additional costs without reducing employment or investment.
Calls for Government Action Amid Economic Strain
Business leaders and economists are urging the government to take immediate action to support companies and prevent further job losses. Employers argue that rising labour costs, combined with broader economic uncertainty, are placing significant pressure on businesses of all sizes.
Gratton warned that firms will face even more difficulty in the coming months due to the rising cost of employment. “Many will be reconsidering their recruitment plans as they try to balance the books,” she said, adding that the government must work to minimise financial burdens on businesses.
Despite the challenges, real wages in the UK have seen positive movement. According to Hannah Slaughter, Senior Economist at the Resolution Foundation, 2023 was the strongest year for wage growth in two decades.
However, she cautioned that this recovery may be short-lived due to ongoing economic stagnation and weak productivity growth.
