Up to 160,000 workers risk losing their jobs in April as a result of Rachel Reeves' planned tax raid, industry bosses have warned.
The upcoming fiscal changes, including a £25billion increase in employer National Insurance (NI) contributions and a 6.7 per cent rise in the National Living Wage effective from April 2025, are expected to decimate industries that operate with slim profit margins.
Instead of passing the cost onto consumers by raising prices, employers will likely cut jobs to remain competitive and maintain demand for goods.
As our graph below shows, the retail and hospitality sectors will be hit hardest.
The retail and hospitality sectors will be hit hardest by Reeves' tax raid
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The British Retail Consortium (BRC) has warned that up to 160,000 part-time retail jobs could be lost over the next three years due to the increased employer NI contributions and the National Living Wage hike.
The rise in labour costs is expected to disproportionately affect part-time roles, as the threshold for NI contributions will decrease from £9,100 to £5,000, making it more expensive for retailers to employ part-time staff. This situation poses a significant risk to positions often held by students and seasonal workers.
The Confederation of British Industry (CBI) has reported that retailers are scaling back investment at the fastest pace in nearly six years, reflecting growing pessimism in the sector.
A survey conducted by industry associations revealed that more than 70 per cent of UK hospitality businesses plan to reduce staff in response to the upcoming tax changes.
The increase in employer NI contributions to 15 per cent and the reduction in rates relief are expected to elevate operational costs substantially.
Consequently, businesses may resort to job cuts, reduced trading hours, and even closures to manage the financial strain.
Significant losses are also projected in manufacturing, health and social care, construction, finance and IT (see chart).
Analysts from Berenberg Bank project that the combined effect of the NI and National Living Wage increases could result in the loss of approximately 150,000 jobs, primarily affecting low-wage workers.
This estimate significantly exceeds the Office for Budget Responsibility's projection of 50,000 potential job losses. The unemployment rate is anticipated to rise from the current 4.1 per cent to 4.5 per cent by the end of the year, heightening concerns about stagflation.
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Reeves has defended the fiscal measures, stating that the changes were necessary to plug the £22billion black hole
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Reeves has defended the fiscal measures, stating that the changes to employer NI contributions are necessary "to raise the revenues required to fund our public services and restore economic stability".
The Chancellor has emphasised that this increase is part of the government's commitment to ensure that work pays and to assist families facing financial challenges.
Last week Reeves tweeted: "I know families are still struggling with the cost of living. That's why we've protected working people's payslips from tax rises, increased the National Living Wage, and provided support for those who need it most."
However, the Chancellor's critics don't buy into this argument as employers will simply pass the cost onto their workers.
Ben Willmott, head of public policy at Chartered Institute of Personnel and Development (CIPD) has also warned the tax raid, alongside changes in employment, will be a "headwind to growth".
He told Reuters: "The increased business costs alongside the raft of changes planned to employment regulation, are bound to act as a headwind to growth."
