Firms shed more jobs as tax rises start to hurt
Employment levels in the UK deteriorated considerably by the end of the first quarter, official data has suggested, in signs that Chancellor Rachel Reeves £20 billion tax raid on employers has squeezed firms' profits. Figures released by the Office for National Statistics (ONS) revealed that the number of pay-rolled employees fell by 53,000 over the first three months of 2025.
The early estimate of payrolled employees for April showed a decrease by 33,000. Signs that inflation may remain sticky in the months ahead were also represented by high levels of annual pay growth, which reached 5.6 per cent in the three months to March.
It could increase challenges for interest rate-setters at the Bank of England though wage growth in the three months to March was slightly lower than the 5.7 per cent figures pencilled in by Bloomberg, which polled several economists in the lead-up to the release. It also came in below recent figures showing wage growth was 5.9 per cent in the three months to February. Total pay growth, which includes bonuses, was 5.5 per cent between January and March while unemployment edged up to 4.5 per cent.
'Wage growth slowed slightly in the latest period but remains relatively strong, with public and private sectors now showing little difference,' Liz McKeown, director of economic statistics at the ONS said.
'The broader picture continues to be of the labour market cooling, with the number of payroll falling in the first quarter of the year. The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months.' Institute of Directors policy advisor Alex Hall-Chen said the figures showed the government needed to take 'urgent action' on improving employment levels.
'The business case for hiring has been weakened by a perfect storm of (April's) increased employer national insurance contributions (NIC's) and above-inflation increases to the minimum wage, alongside a wave of measures in the Employment Rights Bill which will make hiring riskier and costlier,' Hall-Chen said.
A poll of 31 major retailers has found the Employment Rights Bill, currently still going through parliament, will lead to early job cuts and price rises, in the latest sign the government's legislative agenda risks harming economic growth. The bill introduces sweeping changes to zero-hours contracts, sick pay, leave, flexible working and dismissal, and is set to pile extra costs on employers.
The retail sector is already facing significant pressures from high taxes in addition to NIC's which is stifling employment and undermining investment. The British Retail Consortium has now found that major retailers are increasingly concerned about the hits they will suffer from the government's Deputy Leader Angela Rayner's workers' rights reforms.
Seven in 10 HR directors at big retailers believe that the workers' rights reforms will have a negative impact on their businesses, according to BRC's survey, highlighting the widespread pessimism about the damage the bill could do in its current form. More than half of respondents also said that the Employment Rights Bill would lead to a reduction in staff members while 61 per cent said it would 'reduce flexibility' in job offerings.
The 31 retailers surveyed employ some 500,000 people, the BRC said. Among the proposed changes to employment rights are outlawing 'exploitative' zero-hours contracts and providing guaranteed hours. The BRC said they would limit the number of part-time job offerings which comprise half the sector's workforce.
The BRC's chief executive, Helen Dickenson, warned that the changes to the employment rights risked 'putting retail job numbers further into reverse.'
She added: 'Those in charge of retail hiring are clear: unless amended, the bill will make it even harder to keep and create jobs and reduce the flexibility that defines many existing retail roles.'
The BRC also warned consumers face paying more for items at high street shops as most HR directors said the cost of the bill would have a knock-on effect on the price of goods.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Observer
2 days ago
- Observer
Firms shed more jobs as tax rises start to hurt
Employment levels in the UK deteriorated considerably by the end of the first quarter, official data has suggested, in signs that Chancellor Rachel Reeves £20 billion tax raid on employers has squeezed firms' profits. Figures released by the Office for National Statistics (ONS) revealed that the number of pay-rolled employees fell by 53,000 over the first three months of 2025. The early estimate of payrolled employees for April showed a decrease by 33,000. Signs that inflation may remain sticky in the months ahead were also represented by high levels of annual pay growth, which reached 5.6 per cent in the three months to March. It could increase challenges for interest rate-setters at the Bank of England though wage growth in the three months to March was slightly lower than the 5.7 per cent figures pencilled in by Bloomberg, which polled several economists in the lead-up to the release. It also came in below recent figures showing wage growth was 5.9 per cent in the three months to February. Total pay growth, which includes bonuses, was 5.5 per cent between January and March while unemployment edged up to 4.5 per cent. 'Wage growth slowed slightly in the latest period but remains relatively strong, with public and private sectors now showing little difference,' Liz McKeown, director of economic statistics at the ONS said. 'The broader picture continues to be of the labour market cooling, with the number of payroll falling in the first quarter of the year. The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months.' Institute of Directors policy advisor Alex Hall-Chen said the figures showed the government needed to take 'urgent action' on improving employment levels. 'The business case for hiring has been weakened by a perfect storm of (April's) increased employer national insurance contributions (NIC's) and above-inflation increases to the minimum wage, alongside a wave of measures in the Employment Rights Bill which will make hiring riskier and costlier,' Hall-Chen said. A poll of 31 major retailers has found the Employment Rights Bill, currently still going through parliament, will lead to early job cuts and price rises, in the latest sign the government's legislative agenda risks harming economic growth. The bill introduces sweeping changes to zero-hours contracts, sick pay, leave, flexible working and dismissal, and is set to pile extra costs on employers. The retail sector is already facing significant pressures from high taxes in addition to NIC's which is stifling employment and undermining investment. The British Retail Consortium has now found that major retailers are increasingly concerned about the hits they will suffer from the government's Deputy Leader Angela Rayner's workers' rights reforms. Seven in 10 HR directors at big retailers believe that the workers' rights reforms will have a negative impact on their businesses, according to BRC's survey, highlighting the widespread pessimism about the damage the bill could do in its current form. More than half of respondents also said that the Employment Rights Bill would lead to a reduction in staff members while 61 per cent said it would 'reduce flexibility' in job offerings. The 31 retailers surveyed employ some 500,000 people, the BRC said. Among the proposed changes to employment rights are outlawing 'exploitative' zero-hours contracts and providing guaranteed hours. The BRC said they would limit the number of part-time job offerings which comprise half the sector's workforce. The BRC's chief executive, Helen Dickenson, warned that the changes to the employment rights risked 'putting retail job numbers further into reverse.' She added: 'Those in charge of retail hiring are clear: unless amended, the bill will make it even harder to keep and create jobs and reduce the flexibility that defines many existing retail roles.' The BRC also warned consumers face paying more for items at high street shops as most HR directors said the cost of the bill would have a knock-on effect on the price of goods.
Observer
6 days ago
- Observer
IMF revises up UK growth forecast for 2025
LONDON: The International Monetary Fund slightly upgraded its UK growth forecast for this year but warned over fallout from US tariff threats as it held its estimate for 2026. Britain's economy is expected to expand 1.2 per cent in 2025, up from 1.1 per cent estimated last month, the IMF said in its latest outlook document for the UK, partly citing "very strong" first-quarter growth on better-than-expected business investment. It warned, however, that global trade tensions would hit UK growth by 0.3 per cent for the remainder of this year. This is due to "persistent uncertainty, slower activity in UK trading partners, and the direct impact of remaining US tariffs on the UK", the IMF said. The Fund held its forecast that the UK economy would grow by 1.4 per cent in 2026. Britain's Labour government welcomed the updated figure, with finance minister Rachel Reeves emphasising that three recently-struck trade agreements — with the US, EU and India — would help with "protecting jobs, boosting investment and cutting prices". The UK and the United States this month reached a post-Brexit deal which reduces tariffs on British cars and removes those on steel and aluminium. Britain in return will open up markets to US beef and other farm products. But a 10-per cent levy imposed on the UK remains in tact as part of Donald Trump's tariffs blitz on key trading partners. The IMF added that the three trade deals are "just first steps". "We see them as very important at the sectoral level, but not necessarily impacting massively or significantly our forecast," IMF mission chief to the UK Luc Eyraud said in a press briefing. The Fund added that "persistently weak productivity remains the UK's primary obstacle to lifting growth and living standards". British gross domestic product expanded by 0.7 percent in the January-to-March period, official data showed. The Bank of England has raised its UK growth forecast for this year but downgraded expectations for 2026 as it warned of heightened economic unpredictability amid Trump's tariffs. — AFP
Observer
15-05-2025
- Observer
UK economy grows above forecasts, but tariffs threaten progress
LONDON: Britain's economy grew more than expected in the first quarter, official data showed Thursday, covering the period before business tax hikes and US President Donald Trump's tariffs blitz took effect. Gross domestic product rose 0.7 per cent in the January-to-March period after only growing slightly in the final quarter of last year, the Office for National Statistics said in a statement. It beats economists' expectations of a 0.6 per cent increase. The data comes as a boost for Prime Minister Keir Starmer and his Labour government, which struggled to kickstart stagnant growth since coming to power in July. UK finance minister Rachel Reeves welcomed the news, saying the figures "show the strength and potential of the UK economy," while acknowledging that "there is more to do". But analysts cautioned that the bumper growth may not be sustained. Thursday's data covers the period before April's introduction of a hike to a business tax laid out in the Labour government's maiden budget in October. It also precedes a baseline 10-per cent tariff imposed on the UK and other countries by Trump last month. "This might be as good as it gets for the year," said Capital Economics chief UK economist, Paul Dales. - 'Short lived' - The growth spurt is "set to be short lived as tariffs take effect" said Yael Selfin, chief economist at KPMG UK. Despite the announcement of a UK-US trade agreement last week, "tariffs on UK exports to the US remain significantly higher than what they were prior to April," she said. The US deal reduces tariffs on British cars and removes those on steel and aluminium, while in return Britain will open up markets to US beef and other farm products. But the baseline 10-per cent tariff remains intact. In addition, Selfin said, "the indirect impact of trade tensions between the US and the EU will further constrain demand for UK exports". ONS director of economic statistics Liz McKeown said that "the economy grew strongly in the first quarter of the year, largely driven by services, though production also grew significantly, after a period of decline." Analysts attributed the rebound in production to manufacturers rushing to get ahead of the implementation of Trump's tariffs. Separate trade data on Thursday showed that UK exports of goods to the United States increased for the fourth consecutive month in March. "This pattern of increasing exports could be a sign of changing trader behaviour ahead of tariff introduction," the ONS said. "Any residual support for manufacturing from front-running will fade from here on, pointing to activity remaining weak for the foreseeable future," cautioned economists at Pantheon Macroeconomics. The ONS estimated that monthly GDP grew 0.2 per cent in March, from an increase of 0.5 per cent in February. The data comes after the Bank of England last week cut its key interest rate by a quarter point to 4.25 per cent as the threat of US tariffs starts to weigh on economic growth. The BoE also upgraded its outlook for annual GDP for 2025 to one per cent growth from 0.75 per cent, but lowered next year's outlook to 1.25 per cent from 1.5 per cent. Data on Tuesday showed that unemployment hit its highest level since 2021 in the first quarter. — AFP
