Economists at Barclays have warned that Labour’s increase in NICs for employers, and a reduction in the threshold at which employers start paying the tax, will reduce living standards for workers. In a note to clients, analysts said: “We expect the additional costs implied by changes to employer NICs to lead to lower real incomes, through a combination of higher inflation and lower wages.” The alert comes as business leaders across the economy protest the hike – John Longworth, chairman of the Independent Business Network, said Sir Keir Starmer has “betrayed himself and the nation with his first Budget” while Alex Veitch, director of policy at the British Chambers of Commerce added that businesses were now reassessing their plans around investment and recruitment in the short-term.

Labour’s increase in National Insurance contributions has raised costs for businesses employing part-time workers by as much as 73%. The threshold at which they have to start paying was also lowered from £9,100 to £5,000. Stephen Burns, CEO of Hollywood Bowl, said: “We were very disappointed, and that’s putting it mildly.” His company employs 2,600 mostly part-time workers at more than 60 sites across the UK. Neil Carberry, the chief executive of the Recruitment and Employment Confederation, warns that reducing the NICs threshold will make solving Britain’s worklessness crisis harder. “The threshold change is especially challenging as it raises NI on the wages of lower salaried workers much more – not just lower paid workers but also many part-time workers who will become far more expensive to engage,” he says.

According to the Chartered Institute of Personnel and Development (CIPD), public sector pay awards in Britain are set to surpass those in the private sector for the first time in four years. This shift follows the Government’s recent Budget, which confirmed above-inflation pay rises for public sector workers and increased taxes on employment. James Cockett, a senior labour market economist at the CIPD, noted that businesses are facing rising costs that could hinder growth and lead to lower pay rises in the private sector. The report highlights that public sector pay expectations have surged, with anticipated increases of 4% to 5% in the coming months, while private sector pay is expected to remain stagnant at around 3%.

Official figures from the Office for National Statistics (ONS) reveal significant disparities in hybrid working arrangements across age, job type, and education. Workers with degree-level education are ten times more likely to have hybrid arrangements compared to those without qualifications. The ONS noted: “While the trend in working only from home has fallen since 2021, a hybrid-working model… has become the ‘new normal’ for around a quarter of workers.” In autumn 2024, 28% of working adults in Great Britain had hybrid arrangements, with senior managers being the most likely to work from home.

The number of British businesses facing insolvency has surged, with 1,022 companies filing for insolvency last week, marking a 64% increase compared to the same period last year. This rise follows the Chancellor’s recent decision to reduce tax breaks, specifically the business asset disposal relief, which previously allowed entrepreneurs to benefit from a lower capital gains tax rate of 10% on gains up to £1m. Starting from April 6, 2025, this rate will increase to 14%, and further to 18% from April 6, 2026. As a result, many entrepreneurs are feeling the pressure, with the Chancellor’s changes prompting significant concern within the business community.

Rachel Reeves’s tax increase on employers’ National Insurance contributions is causing significant concern among retail and hospitality leaders, who warn it could lead to high streets becoming “ghost towns.” Luke Johnson, chairman of Gail’s bakery, stated that the tax hike “adds to the decline of town and city centres.” The Night Time Industries Association reported that 40% of its members face closure within six months, with CEO Michael Kill declaring the Budget a “death sentence” for many businesses. Andrew Goodacre from the British Independent Retailers Association noted that members will likely reduce staff hours and trading times, making revitalising high streets even more challenging.

The Country Land and Business Association (CLA) warns that small family farms could face an inheritance tax (IHT) liability exceeding their profits, with some paying up to 159% of their earnings. Following recent Budget changes, the CLA argues that the Chancellor’s decision to limit 100% relief for family farms to the first £1m of combined agricultural and business property will severely impact farm viability. Gavin Lane, the CLA’s deputy president, stated: “While they frame this as a tax on the wealthy, the reality is that ordinary family farms will be hit just as hard.” The National Farmers Union estimates that 75% of UK food production may be affected by these changes, prompting a planned “mass lobby” event in London on November 19 to address the issue. Elsewhere, accountancy firm Saffrey estimates that 5m acres of farmland is at risk of being sold off as a result of Labour’s tax raid. Meanwhile, the Government insists that the “vast majority” of farmers will not be affected by the change.

Direct Line is set to cut approximately 550 jobs, representing about 5% of its workforce, as part of a cost-cutting strategy under new CEO Adam Winslow. The company has faced challenges, including a decline in its customer base and a drop in gross written premiums from £1.1bn to £705.1m year-on-year. Winslow stated: “It takes typically 12 months for activity to earn through,” indicating that the turnaround is still in its early stages. The insurer has also been grappling with rising claims costs and increased scrutiny from the government regarding motor insurance pricing. Winslow believes that government intervention could be beneficial, as many factors driving inflation in motor premiums cannot be resolved by insurers alone.

Liam Byrne, Labour chair of the Commons business committee, has warned that Donald Trump’s proposed tariffs on imports could lead to a “doomsday scenario” for the UK economy. He predicts that these tariffs, which could reach 60% on goods from China, would significantly impact growth, inflation, and interest rates. The National Institute of Economic and Social Research has cautioned that such changes could halve UK economic growth. Byrne stated: “If that does go ahead that is going to have a really significant impact on growth, inflation and interest rates on the UK.”