(qlmbusinessnews.com . Tues 18th Feb, 2025) London, UK —
Small Business Confidence Hits Decade Low as Hiring Slows in 2025
A significant number of UK businesses are planning job reductions or hiring slowdowns as they prepare for the upcoming increases in National Insurance contributions and wages, a new survey has found.
The Chartered Institute of Personnel and Development (CIPD) survey revealed that over a third of the 2,000 firms polled intend to either reduce staff through redundancies or curb recruitment. Additionally, 42% of businesses indicated they would increase prices to offset rising employment costs, while a quarter planned to scale back investments or expansion efforts.
The findings come as the latest employment data is set to be released on Tuesday, providing further insight into the state of the UK labour market.
-Small Business Confidence at Decade-Long Low
Separate research by the Federation of Small Businesses (FSB) highlighted growing concerns among smaller enterprises. The study found that business confidence in the last quarter of 2024 dropped to its lowest level in ten years, excluding the COVID-19 pandemic period. Many small firms now anticipate a contraction in the first quarter of 2025.
Peter Cheese, Chief Executive of the CIPD, described the changes in employer sentiment as some of the most negative seen in a decade outside of the pandemic. “Everyday economy sectors, such as retail and hospitality, which employ large numbers of people, will be particularly affected by these increasing employment costs,” he warned.
-Government Defends National Insurance Hike
The government has justified the planned rise in National Insurance, stating it is necessary to fund essential public services and address a financial shortfall. From April, employer National Insurance contributions will increase to 15% on salaries above £5,000, up from the current 13.8% on earnings over £9,100.
Chancellor Rachel Reeves has defended the budget, calling it a “once-in-a-Parliament budget” designed to bring economic stability and encourage business investment. She acknowledged the difficulty of the decision but insisted it was made “in the national interest.”
However, critics argue that the increase will hinder economic growth and discourage job creation. The British Chambers of Commerce (BCC) recently reported a sharp decline in business confidence, while major UK retailers have warned of potential job losses, rising prices, and shop closures.
–Inflation and Economic Outlook
The impact of rising employment costs could further fuel inflation, which stood at 2.5% in December. The Bank of England has cautioned that inflation could spike to 3.7% later this year before gradually falling back to its 2% target.
Despite these concerns, Governor Andrew Bailey reassured businesses that inflation is slowly easing. “The after-effects of economic shocks from two or three years ago are wearing off, but it remains a gradual process,” he stated.
The next set of inflation figures, scheduled for release on Wednesday, will provide further insight into price trends and economic stability.
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