UK firms mull biggest layoffs in a decade as business confidence slumps

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UK employers are preparing for the biggest redundancy round in a decade amid collapsing business confidence as firms brace for tax increases from April that Rachel Reeves announced in her autumn budget,In a fresh blow for the chancellor, the Chartered Institute of Personnel and Development (CIPD), which represents human resources professionals, said a survey of 2,000 employers showed redundancy intentions at their highest level in 10 years, barring the Covid pandemic,Reeves has come under intense pressure after a series of weak economic data, undermining her plans to grow the economy,Official figures last week showed Britain narrowly avoided a recession in the second half of 2024 after showing unexpected growth in the fourth quarter,Figures out this week are expected to show a rise in inflation and unemployment, emboldening Reeves’s critics and unnerving backbench Labour MPs concerned that the government’s economic agenda is being blown off course.

The CIPD survey, which was carried out in the second half of January, found that most employers blamed the rise in employer national insurance contributions and a 6.7% increase in the “national living wage”.Almost a third (32%) plan to reduce their headcount through redundancies or recruiting fewer workers.A separate survey by the Federation of Small Businesses (FSB) revealed a dramatic slump in sentiment, adding to the worsening outlook for the government.A measure of confidence among small firms about the year ahead dropped from -24.

4 points to -64.5 points, on a scale where the proportion of firms reporting a negative response are subtracted from the share reporting a positive one.Firms in the accommodation and food services sectors registered the lowest in the FSB’s index at -111.0 points.The FSB said its survey, which was carried out in December, showed firms were more concerned about tax increases than weak consumer demand.

Firms also cited the prospect of enhanced protection for staff in the planned employment rights bill, expected to take effect next year.Half said they expected their revenues to fall in the first quarter of this year.The CIPD’s chief executive, Peter Cheese, said: “These are the most significant downward changes in employer sentiment we’ve seen in the last 10 years, outside the pandemic.“Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction.Businesses have had time to digest these impending changes, with many now planning to reduce headcount, raise prices and cut investment in workforce training,” he said.

Inflation is on course to rise to 2,8% in January from 2,5% in December when official data is published on Wednesday this week,Figures on Tuesday covering the labour market are expected to show the unemployment rate rising to 4,5% in December from 4.

4% in the three months to November.Unemployment has risen steadily over the last year and is expected to continue to do so as employers cancel hiring new staff and begin to make workers redundant.The British Beer and Pub Association (BBPA) said on Monday that six pubs shut their doors for good every week last year, resulting in about 4,500 job losses across the country.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionIt said the October budget would add £650m in costs for the sector, worsening the outlook for publicans.“We’re right behind Labour’s mission to supercharge growth and can deliver this economic boost across the UK,” the BBPA’s chief executive, Emma McClarkin, said.

“But only if it is easier for pubs to keep their doors open.”The FSB said the fall in confidence among small businesses had been recorded across all major sectors.None registered a positive confidence score.Its policy chair, Tina McKenzie, said: “The fourth-quarter blues reported by small firms underlines how urgently the government’s growth push is needed.“Small firms are understandably nervous about their prospects as 2025 gets under way.

“The upcoming employment rights bill is a major source of stress for small firms, with nine in 10 business owners saying they are concerned about its introduction, and this is undoubtedly a major cause of the very subdued confidence levels seen in our research.”A Treasury spokesperson said: “We delivered a once-in-a-parliament budget to wipe the slate clean and deliver the stability businesses need to invest and grow, while protecting working people’s payslips from higher taxes, ensuring more than half of employers either see a cut or no change in their national insurance bills, and delivering a record pay boost for millions of workers.“Now we are going further and faster to kickstart economic growth and raise living standards, with a majority of business leaders confident that the chancellor’s plans will help drive business investment.”
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