Businesses have warned that growth and recruitment will fall for the first time this year, according to an industrial trends survey by the Confederation of British Industry (CBI).
Many firms said their plans to hire staff had been set aside since the summer but many said that the rise in employer national insurance contributions (NICs) will “dampen hiring, push up prices and/or squeeze investment budgets”.
The survey of business leaders is the latest blow to Chancellor Rachel Reeves as evidence mounts that corporate confidence has collapsed since the budget.
Companies said that her budget announcements are set to lead to job cuts in the three months to February as polling found recruitment plans at their weakest since January 2021.
Job vacancies have continued to fall and the number of unemployed workers per vacancy has steadily increased. Companies said October’s Budget hit sentiment across the private sector further, with most reporting a mostly negative reaction to the Chancellor’s announcements.
The CBI, which represents 170,000 businesses, said its snap survey after Chancellor Rachel Reeves’s announcements found that nearly two-thirds of firms thought the decisions would impact on investment plans, and half of firms would reduce the headcount as a result.
Alpesh Paleja, the CBI interim deputy chief economist, said: “As we head into 2025 expectations for growth have taken a decisive turn for the worse.“Our surveys suggest that anticipated activity was already weakening heading into the October Budget and the Chancellor’s announcements have left businesses with even more tough choices to make.
“News that firms are planning to reduce headcount is a concern, with hiring intentions at their weakest since the tail-end of the pandemic.”
Paleja added: “This could be an early sign of the impact of higher labour costs from the upcoming rise in employer NICs, and the uprating in the National Living Wage. “Against this background, firms are looking to government to take a lead in helping generate positive momentum for the economy.
“That means moving quickly and decisively to reform business rates, deliver apprenticeship levy flexibility, and boost occupational health incentives to support the health of the workforce.”
The CBI survey follows polling by the Institute of Directors, also representing business leaders, which found that optimism among its members had fallen to the lowest since the onset of the pandemic, after tax rises announced in the Budget.
“As businesses continue to absorb the consequences of the Budget for their business plans, confidence has continued to plummet,” IoD Chief Economist Anna Leach said.
“Far from fixing the foundations, the Budget has undermined them, damaging the private sector’s ability to invest in their businesses and their workforces,” she added.
It said company investment plans and employment intentions were the weakest since May 2020 last month, while a gauge of business leaders’ optimism sank to its lowest since April 2020.
