Employers across the UK are getting ready for what could be the largest round of redundancies in ten years, as escalating business costs and tax hikes from April prompt widespread apprehension. A recent survey by the Chartered Institute of Personnel and Development, which polled 2,000 employers, indicates that intentions to reduce staff numbers are at their highest in a decade, outside the unusual circumstances of the Covid-19 period. This uncertainty is largely driven by upcoming increases in National Insurance contributions and a 6.7% boost in the national living wage announced in the autumn budget by Chancellor Rachel Reeves.
The situation has intensified the challenges faced by the Labour government, which has already been criticized for its economic management. Although recent figures showed that the UK narrowly averted a recession in the latter half of 2024, there are growing concerns that rising employment and operational costs could lead to economic decline in the following year. Additionally, inflation is projected to rise to 2.8% by January, and unemployment is expected to edge up to 4.5%, highlighting a steady deterioration in economic indicators.
Small businesses are also feeling the impact, with the Federation of Small Businesses reporting a precipitous drop in confidence, particularly in the hospitality and retail sectors. The impending employment rights bill, which will enhance worker protections, is adding to these worries by increasing the regulatory burden on companies already reeling from cost pressures. Meanwhile, industry bodies like the British Beer and Pub Association are sounding the alarm, noting a troubling trend of weekly pub closures and significant job losses in the sector.
Business leaders, including the chief executive of the CIPD, Peter Cheese, have noted that firms are already adopting measures such as laying off staff, adjusting prices, and curtailing investment in workforce development to cope with the rising costs of employment. With business sentiment at its lowest level in a decade, there is growing concern that without renewed confidence and support for businesses, the UK could face further job losses and an economic slowdown that would strain both workers and the broader economy.