Shadow Chancellor Mel Stride has warned that unless Rachel Reeves scraps changes to employers’ National Insurance, she risks a slowdown in economic growth. With a 1.2% increase in employers’ National Insurance contributions set to take effect on April 6, Mr Stride said: “This is not just another tax increase. It’s a ticking time bomb that threatens to further decimate jobs, stunt economic growth, and escalate inflation.” Mr Stride said that although the 1.2% increase “might not sound a lot … it’s a significant sum that will see jobs cut, wages stagnate, investment plans shelved, prices rise and businesses fold.” The tax increase is expected to raise between £23.8bn and £25.7bn a year for the Treasury but Mr Stride says this will be swallowed up by increased government borrowing costs. While the rate of employers’ NI contributions will climb from 13.8% to 15%, the threshold at which businesses must pay the tax will be lowered to £5,000, from £9,100, meaning more lower paid staff will be pulled into the NI net.

The Institute for Fiscal Studies (IFS) has warned that Chancellor Rachel Reeves may be forced into fresh tax hikes or a new wave of austerity due to the state of Britain’s public finances. Warning that the Chancellor’s £9.9bn financial buffer from October’s Budget has been wiped out, IFS research economist Dr Isabel Stockton said Ms Reeves has been left with “a tiny, tiny margin relative to the uncertainties involved.” The IFS also said that Ms Reeves is juggling “competing commitments,” having promised not to increase taxes while also ruling out a return to austerity. IFS director Paul Johnson says the Chancellor is likely to extend a freeze on tax bands, with this set to pull more people into paying higher rates.

Businesses are set to increase prices due to rising wage costs and higher employer National Insurance rates. According to the Office for National Statistics, 49% of companies with ten or more staff plan to raise prices in the coming months. The ONS found that 66% of businesses anticipate rising staffing costs, while 26% are considering job reductions. The ONS’s business insights and impacts survey found that just under a third of firms said they would absorb the hit within profit margins. Andrew Bailey, governor of the Bank of England, this week told the Treasury Select Committee that employers might respond to the hike in costs by cutting hiring, reducing hours, or laying off staff. The changes in employer NI contributions, which will rise from 13.8% to 15%, alongside a national living wage increase to £12.21 per hour, are expected to impact the labour market significantly. Oxford Economics predicts a loss of 55,000 jobs and a slight decline in pay growth.

Analysis by the Investment Association (IA) shows that investors pulled £3bn out of funds in January, with the outflows driven by economic instability as inflation increased and GDP growth stagnated. This marked a reversal from December, when £2.3bn flowed into funds. The UK All Companies sector, covering funds with over 80% invested in quoted UK shares, saw an outflow of £1.2bn in January, while the UK Smaller Companies sector logged £206m in outflows. Bonds and mixed assets saw inflows of £187m and £39m, respectively. Reflecting on the IA data, Kate Marshall, lead investment analyst at Hargreaves Lansdown, said a “backdrop of weaker economic growth, rising inflation, uncertainty around fiscal policy, and the potential for tax rises in the spring budget” had contributed towards a “weakened” UK sentiment.

Profits at recruitment firms PageGroup and Robert Walters have significantly declined due to a stagnant hiring market. PageGroup’s revenues fell by 13.5% to £1.74bn, with pre-tax profits slipping to £49.1m from £117.4m. Similarly, Robert Walters reported a 16% drop in revenues to £892.1m, with profits down 98% to £0.5m. The downturn is attributed to geopolitical uncertainties and a lack of substantial pay increases, leading both companies to reduce their workforce by 20%. Robert Walters CEO Toby Fowlston said it remains “uncertain when a sustained improvement” in the jobs market might arise.

Rupert Soames, president of the Confederation of British Industry and chairman of Smith & Nephew, has voiced concern that the Government’s employment reforms are “highly damaging” to companies’ willingness to invest and hire. Despite recent amendments to the legislation, Mr Soames believes the Employment Rights Bill will deter both domestic and foreign businesses from expanding their workforce in the UK. He has also highlighted that the reforms come amid significant increases in employment costs, including changes to employers’ National Insurance and the living wage, as well as increases in business rates and taxes on the “intergenerational transfers of business assets.” These factors, he said, are “deeply damaging to investment and growth,” adding that Government estimates suggest they will add £5bn to companies’ costs.

The Payment System Regulator (PSR) has warned that the card market “isn’t working well.” This comes on the back of a review into the transparency of fees charged by Mastercard and Visa which found that the firms have raised core scheme processing fees by 25% since 2017. The review, which said higher fees had led to added pressure on businesses, found no evidence that the increased fees were due to competition, costs, or innovation. The payments regulator also said that profit margins at the payment networks were “higher than would be expected in a well-functioning market.” David Geale, managing director at the PSR, said: “The confusing information Mastercard and Visa make available to acquirers and merchants contributes to poorer market outcomes through raising their costs of dealing with this overly complex information.”

Bank of England rate-setter Catherine Mann says officials should adopt a more activist approach to setting interest rates due to the “substantial volatility coming from financial markets.” Ms Mann, an external member of the Monetary Policy Committee, suggested that the committee should be open to more radical shifts in monetary policy as they look to keep inflation close to the Bank’s 2% target.