A recent survey by the British Chambers of Commerce (BCC) highlights a concerning trend in the UK labour market, with one in six companies cutting hiring in the final quarter of 2024. This marks the highest share of firms reducing their workforce since early 2021. According to the survey, 16% of businesses cut jobs in the fourth quarter, up from 13% in the previous quarter.
A significant factor contributing to this slowdown in hiring is the mounting pressure on businesses to raise prices due to higher labour costs. The survey revealed that 75% of companies were forced to increase prices because of rising employment costs, a sharp increase from 66%since the record started in 2017.
These pressures came in the wake of UK Finance Minister Rachel Reeves’ budget in October 2024, which proposed a 25 billion-pound ($30.29 billion) increase in payroll taxes. The higher tax burden, combined with upcoming increases in national insurance contributions and the minimum wage in April 2025, is expected to significantly raise employment costs for businesses. Jane Gratton, the BCC’s deputy director of public policy, warned that these changes would likely affect recruitment, retention, and staff development, as companies will need to adjust to the additional financial strain.
The BCC’s findings are especially concerning for the workforce, as businesses may become more cautious in hiring and wage growth. As companies face these rising costs, job opportunities could become more limited, potentially impacting workers in various industries. These challenges are likely to catch the attention of the Bank of England, which will monitor the economic impact of these changes on inflation and business confidence.
