The British Chambers of Commerce (BCC) has warned that 8 in 10 UK companies will be forced to reconsider their future strategies when the proposed increase in employers’ national insurance contributions takes effect, bringing a “powder keg of costs” for businesses.
In a recent poll, 82 per cent of BCC-member companies said the higher tax burden will prompt them to revisit their operational plans, while 58 per cent expect a negative impact on recruitment and 54 per cent anticipate hiking their prices. More than a third (36 per cent) believe the rise will hold back investment.
Chancellor Rachel Reeves announced in October’s budget that employers’ national insurance contributions will go up by 1.2 percentage points to 15 per cent from April, alongside a reduction in the annual salary threshold at which businesses start paying national insurance, from £9,100 down to £5,000. Ministers forecast these moves will raise £25 billion a year by the end of the decade.
Reeves has defended the measure as “the right choice to make”, insisting that “successful businesses depend on successful schools, healthy businesses depend on a healthy NHS and a strong economy depends on strong public finances”.
However, corporate leaders, especially those in lower-margin sectors such as retail and hospitality, have criticised the rise, citing it as one more cost on top of reforms in workers’ rights and higher minimum wages. In a letter to Reeves in November, more than 70 high-profile retailers—including Tesco, Marks & Spencer, Sainsbury’s, Asda and Next—warned that rising costs would “inevitably” lead to job losses.
The BCC, which operates 51 chambers across the country and surveyed around 1,300 predominantly small businesses (fewer than 250 employees), also revealed that many firms are dissatisfied with the Government’s broader policymaking. Nearly 80 per cent felt that new policy effects are not being properly assessed.
Alex Veitch, the BCC’s director of policy, said the survey points to businesses “sitting on a powder keg of costs”. He noted that most firms “will have to raise prices and reconsider recruitment plans”, a situation he argues could undermine economic growth—a key government priority.
Veitch added that the Government should “pause for thought” over continuing its national insurance strategy for the duration of this parliament, and urged “urgent” business rates reform. He also raised concerns about the planned expansion of employment rights legislation, saying, “Some of the proposals are completely disproportionate to the reality of how businesses are operating.”
Jonathan Reynolds, the business secretary, met with corporate leaders in London this month, acknowledging that the latest budget “asked a great deal of business”. He stressed, however, that these measures are essential to restoring public finances and funding infrastructure improvements, which, in his view, will bolster UK competitiveness in the long term.
Ministers point to major commitments such as backing for a third runway at Heathrow, infrastructure developments in the Oxford-Cambridge corridor, and the launch of the National Wealth Fund as proof that the Government remains focused on spurring growth.
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Most UK businesses to ‘rethink their plans’ as tax rise takes toll