The recent rise in national insurance is set to cause a number of UK businesses to cut back on investment and job creation, new data has shown.
According to a survey from the Recruitment and Employment Confederation (REC), around one in five firms said the tax rise would reduce their ability to invest, while one in six said they were less confident to create new roles.
Employers’ expectations for the UK economy and their ability to recruit took a downturn over the past three months. In the first quarter confidence in hiring stood at 8, one percentage point lower than in the last three months of 2021.
Hiring intentions for permanent staff members in the short term rose by nine percentage points to 28 during the quarter, while medium-term hiring intentions increased by seven points to 26.
However, plans to hire temporary agency workers declined by 14 percentage points in the short term (16) and by eight points in the medium term to 15.
The JobsOutlook research also showed that companies felt they were under pressure to increase wages amid the current cost of living crisis and soaring inflation. Its measure of business confidence fell back to -11 after a slight uptick at the turn of the year.
“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,” Neil Carberry, chief executive at the REC, said.
“We expect to see employers’ hiring plans decouple further from their economic outlook over the coming months as they face a tight labour market.”
“More employers are switching their hiring intentions towards permanent staff, as the urgent need for contingency staff to cover COVID absences decreases. But temporary workers remain vital to managing uncertain and fast-changing markets.”
The national insurance hike came into effect at the start of this month to fund £39bn into health and social care.
However, an assessment by HM Revenue and Customs (HMRC) after the policy was announced calculated that 29 million workers would be worse off as a result of the measure.
Despite calls to delay the rise, with energy, fuel and food bills all rising, chancellor Rishi Sunak went ahead with the 1.25 percentage point hike.
It means annual earnings above £9,880 are now liable for 13.25% NI contributions. Above a higher threshold of £50,270, the rate will be 3.25%.
Watch: Campaigners in Rishi Sunak masks protest chancellor's national insurance hike