25% of UK employers plan to cut jobs before tax rises hit
Srichand Myneni
3rd March 2025
Written by Srichand Myneni
The introduction of budget tax increases in April is likely to result in significant redundancies across a quarter of UK employers, according to a survey that highlights concerns about a sharp downturn in the job market. The increases in national insurance contributions, a higher minimum wage, and rising business rates are the main causes. The survey reveals that 25% of employers plan to cut jobs, the highest level since 2014, excluding the pandemic. The largest job cuts are expected in sectors such as retail, hospitality, and transport.
In addition to tax hikes, many employers are grappling with the pressures of rising wages and business rates. The survey found that 16% of respondents expect their staff levels to decrease in the three months leading up to March, up from 11% in the previous quarter. Among those facing higher staffing costs, a third plan to reduce headcount by making redundancies or hiring fewer workers, while 25% intend to cut overtime and bonuses. A further 20% plan to reduce basic pay and training, and another 25% are scaling back investment and expansion plans.
Peter Cheese, the CIPD’s chief executive, noted that the survey shows the most significant decline in employer sentiment in the past decade, excluding the pandemic. He pointed out that sectors like retail and hospitality, which employ large numbers of workers, are bearing the brunt of the impact.
These findings are part of a wider trend of pessimism, with a separate survey by the Federation of Small Businesses showing confidence among small businesses at new lows. A quarter of respondents expect their businesses to shrink in early 2025, further exacerbating concerns about the economy. Catherine Mann, an external member of the Bank of England’s Monetary Policy Committee, warned that the tax increases could dramatically alter employment plans for companies hardest hit. She predicted a sudden weakening of the labour market, which had previously remained resilient despite a period of stagnating GDP growth.
The CIPD survey also highlights a growing divide between low-wage sectors, which are most affected by the tax hikes, and other industries struggling with skill shortages. The number of employers planning job cuts is rising fastest in retail, hospitality, transport, storage, and support services. In construction, despite government initiatives to boost infrastructure and housebuilding, 10% of employers expect job cuts. However, many construction firms, still facing difficulties in filling vacancies, are opting for automation rather than layoffs.
James Cockett, a senior labour market economist at CIPD, warned that cuts in investment and training could create long-term skill gaps, ultimately making the UK a less attractive place to invest.
