A Bank of England survey has shown that UK businesses cut jobs this summer at the fastest rate in four years, highlighting the strain of higher taxes on employers.
The monthly Decision Maker Panel survey of more than 2,000 chief financial officers found that employment fell by 0.5% in the three months to August, the steepest drop since 2021. Intentions for future hiring also weakened, with expectations for job growth slipping from 0.5% to just 0.2%.
Business leaders blamed the Government’s decision to raise employer national insurance contributions (NICs) by £25 billion in April. Almost half of the respondents said the increase had forced them to cut staff numbers, while many others reported passing costs on through higher prices.
Two-thirds of firms said profit margins had been squeezed, 34% raised prices, and 20% said they paid lower wages than planned. Despite this, the Bank noted the impact was less severe than firms had feared before the NICs changes took effect.
Economists have noted that the fall in employment could influence the Bank’s decision on interest rates when it meets on 18 September. Markets currently expect borrowing costs to remain at 4%.
Chancellor Rachel Reeves, who has set 26 November for her second budget, has acknowledged that the economy is “not working well enough for working people”. The later budget date is expected to fuel speculation over further tax rises, but the Treasury says it will also be used to outline pro-growth reforms.
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