UK businesses slash jobs after tax raid
UK employers slashed jobs at the fastest pace in four years as companies suffer the costs of tax decisions from Rachel Reeve’s Autumn Budget last year.
Companies cut employment by an annual rate of 0.5 per cent in the three months to August. This is the worst figure since 2021, according to a Bank of England survey of chief financial officers.
Expectations for employment growth over the next year have also weakened, falling by 0.3 percentage points to 0.2 per cent in the three months to August.
This is the lowest reading since October 2020, when the UK economy was starting to claw back from the blow of the Covid-19 pandemic.
Despite employment cuts, annual wage growth remained subdued, at 4.6 per cent in the three months to August, 0.1 percentage points lower than the three months to July.
Wage growth for the year ahead remained unchanged at 3.6 per cent.
Fingers pointed at the Budget
Companies have blamed their employment woes on the tax increases introduced in Reeves’ first Budget last October.
Nearly half of the surveyed companies said they were cutting jobs as a result of the Chancellor’s decision to increase employer national insurance (NI) contributions.
A £25bn increase in NI contributions took effect in April, along with a rise in minimum wage.
But since the tax increase came into force, 20 per cent of companies reported lowering wages, while a third opted to increase prices.
Over two thirds reported lowering profit margins.
Executives also increased their expectations for inflation over the coming year by 0.1 percentage points to 3.3 per cent.
Reeves under pressure to fill black hole
The damning report will place further pressure on Reeves, as ministers scramble to confront an estimated £20bn hole in public finances.
The Treasury is mulling a host of tax increases in the run up to the impeding Autumn Budget on the 26th November, but executives and industry bodies have warned against fresh rises.