The recent increase in National Insurance by the UK government is leading to concerns over inevitable job losses, impacting major high street retailers.
- Chancellor Rachel Reeves has adjusted the National Insurance rate for employers from 13.8% to 15%, effective from April, with a lower salary threshold for contributions.
- Over 70 retailers, including large names like Tesco and Amazon, have warned of the financial burden this hike will place on businesses.
- The British Retail Consortium (BRC) highlights the cumulative £70 billion annual costs from this, combined with other measures like the increased minimum wage.
- The Treasury argues the changes are necessary for economic stability but assures protections for many employers and increased NHS funding.
The UK government’s decision to increase the employers’ National Insurance rate from 13.8% to 15% has sparked warnings from the nation’s biggest retailers of unavoidable job losses. Chancellor of the Exchequer Rachel Reeves announced that from April, not only will the National Insurance rate rise, but the threshold at which employers start paying contributions will drop from £9,100 to £5,000. This change is set to significantly impact operational costs for businesses of all sizes.
A collective of over 70 businesses, comprising household names such as Tesco, Sainsbury’s, Next, Amazon, and Boots, have conveyed their concerns to Chancellor Reeves through a letter facilitated by the British Retail Consortium (BRC). The letter stresses that the financial surge due to this policy adjustment could prompt widespread job cuts, particularly affecting entry-level positions. The predicted £70 billion annual increase in costs stems from the combined pressure of National Insurance hikes, a rise in the national minimum wage, and additional packaging levies.
Retailers argue that these economic pressures will translate into increased inflation, stagnation in pay growth, and a spate of store closures. The BRC emphasises that absorbing such substantial cost increases swiftly is untenable for retailers, whether large or small, without resorting to drastic measures that could harm high streets and customer bases across the country.
In response, a Treasury spokesperson defended the government’s fiscal strategy, citing an inherited £22 billion deficit and the need to bolster the NHS with £22.6 billion in additional funding. The spokesperson noted that, for over half of employers, the National Insurance changes would result in either a reduction or no change in their bills, aiming to shield workers from higher taxes.
The letter also highlighted recent financial pressures on individual retailers, with Tesco anticipating a £1 billion increase in its National Insurance bill and Asda reporting a £100 million increment, describing it as a significant challenge. This demonstrates the acute sensitivity of the retail sector to tax changes and the broader implications for employment and economic stability.
These ongoing financial challenges underscore the delicate balance between fiscal policy and economic impacts on businesses and employment.
