From the beginning of this month, National Insurance contributions in the UK have increased by 1.25 percent. This will remain fixed until the beginning of April next year.
This recent rise is set to cause a number of UK businesses to cut back in their struggles for profitable revenues. This will mean reductions in investment and job creation, as demonstrated by new data.
A recent survey conducted by the Recruitment and Employment Confederation found that around one in five firms believed that the tax rise would minimise their ability to invest. The survey further found that one in six said that they felt less confident in creating new job roles within their businesses.
Over the past three months, many UK businesses have seen their ability to hire take a major hit. Confidence in hiring stood at 8, a point lower than the three months prior in late 2021.
While hiring intentions for both permanent and medium-time employees rose in the first quarter of this year, plans to hire temporary staff were on the decline, falling by 14 percent.
Further research conducted by JobsOutlook found that companies were torn over several external pressures – including calls for wage increases, the cost of living crisis, as well as soaring inflation rates. JobsOutlook found that their measure of business confidence fell to -11 and a desperate need to find ways to save money as a business.
Chief Executive at the Recruitment and Employment Confederation, Neil Carberry said “It is no surprise that firms are more concerned about the outlook. But British firms are resilient and investment in staff and growth remain on the agenda when employers think about their own business.”
“We expect to see employers’ hiring plans decouple further from their economic outlook over the coming months as they face a tight labour market.”
Many SME businesses will now turn towards hiring permanent members of stuff, as the urgent need for temporary staff to cover for Covid absences is on the decline. It is important to remember however the important role that temporary workers play in the economy, often stepping in to help with the management of uncertain markets.
The national insurance rise by 1.25% came into effect earlier this month in an attempt to fund £39 billion towards the NHS.
A recent assessment conducted by the HM Revenue and Customs found that after the policy was announced, around 29 million workers would already be worse off financially as a result of the rise.
Consequently, those with annual earnings above £9,880 are now liable for the 13.25% NI contributions. Further, those earning above the higher threshold of £50,270 will now pay a rate of 3.25% NI contributions.