Is UK jobs market already showing warning lights over Reeves budget?
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Reports that government could weaken employment rights bill as NI rise prompts fears of redundancies. When the latest labour market figures were being gathered in the run-up to Christmas by the Office for National Statistics (ONS), employers were only just beginning to digest a budget that will load about £25bn on to their wage bills.
The data from December showed pay increased in line with expectations, at 5.6%, but the unemployment rate was higher than City economists forecast, at 4.4%, and the number of vacancies fell for the 30th consecutive month. A trend over the previous year for employers to reduce staff and hiring was continuing its steady course. The question was for how much longer as the prospect of the tax rise neared.
In April, employer national insurance contributions rise to 15%, the threshold drops – catching many part-time workers in the tax net for the first time – and the minimum wage rises by 6.7%. Businesses were likely still assessing what the impact will be when the ONS gathered its figures.
Executives will have been considering whether to cut jobs, freeze recruitment, reduce their training budget, limit pay increases or to pass the cost on to consumers in higher prices. Reeves will fly to the World Economic Forum in the Swiss ski resort of Davos for meetings on Wednesday and Thursday to talk up the UK as a destination for foreign investment. Her officials are hoping businesses carry out none of the above.
