Rachel Reeves presented her Spring Statement today (Image: Getty)
Rachel Reeves’ business tax hike has led to huge British businesses letting staff go or pausing hiring, research suggests. The Chancellor’s increase to employers’ National Insurance payments has led to entrepreneurs urging the Government to provide “urgent support with the financial strain”. Helm, a membership community for scale-up founders and CEOs in the UK, polled its 400 member businesses, which have an average revenue of ￡21million. It found that 36% have “frozen their hiring plans or are cutting staff”.
Business leaders warn that the increased costs will have a “particularly severe impact” on sectors operating with slim margins, such as care services, where “further efficiencies are difficult to achieve”. “The timing couldn't be worse, with many companies still working to stabilise after recent economic challenges,” Andreas Adamides, CEO of Helm, said. "What's particularly concerning is the disproportionate impact on sectors such as elderly care, where tight margins mean businesses have little choice but to reduce staff or raise prices.
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The Chancellor's critics say her policies are stifling growth rather than promoting it (Image: Getty)
“This could create a ripple effect across the economy, affecting both consumer spending and employment opportunities.”
Helm’s members have a combined revenue of ￡8billion.
The polling was carried out with members online between March 14 and 17.
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Mr Adamides added: “We're calling on the government to introduce targeted relief measures for the hardest-hit sectors and to consider a phased implementation approach that would give businesses more time to adapt to these increased costs."
The survey asked what the “primary impact” of the NI increase on hiring and workforce strategy was, and 24% said they are “freezing hiring plans”, with another 12% stating they are ‘reducing staff’.
Some 24% said it had “no impact”, while another 24% said they will be “increasing prices to their customers to compensate”.
When asked if the Government should “provide more support to help businesses manage the increase”, 58% said, “yes, urgent action is needed”.
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The overall tax burden in the UK is forecast to rise (Image: Getty)
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Some 39% meanwhile said “maybe, but businesses should adapt”, while only 3% said “no, businesses should handle this independently”.
The overall tax burden in the UK is forecast to rise from the equivalent of 35.3% of GDP in 2024/25 to an “historic high” of 37.7% in 2027/28, according to the Office for Budget Responsibility (OBR).
This is more than four percentage points above the pre-pandemic level of 33.2% in 2019/20. The peak of 37.7% is lower than previously forecast, however.
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At the budget in October, the OBR said the tax burden was likely to climb as high as 38.3% in 2027/28.
The main driver of the increase in the tax burden are personal taxes, “particularly income tax and national insurance contributions”, experts said.
Beyond 2027/28, the figure is forecast to stabilise at 37.5% in both 2028/29 and 2029/30.