According to new research by the CIPD, almost a third (32%) of UK employers are planning redundancies or reducing hiring due to rising employment costs. This shift marks the highest increase in redundancy plans in the past decade, excluding the pandemic period.
“These are the most significant downward changes in employer sentiment we’ve seen in the last ten years, outside of the pandemic. Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction. Businesses have had time to digest these impending changes, with many now planning to reduce headcount, raise prices and cut investment in workforce training, ” said Peter Cheese, chief executive at the CIPD.
The survey shows that 32% of businesses expecting higher employment costs plan to reduce their workforce by cutting jobs or hiring fewer employees. In addition, 42% of businesses plan to raise their prices to offset the increased cost of employing staff. A quarter of businesses (24%) also indicated they would scale back or cancel plans for expansion or investment in their operations.
The impact across all sectors
This decline in confidence is evident across several key sectors, including retail, hospitality, transport, and construction. Notably, the retail sector saw a dramatic drop in employment confidence, with its net employment balance falling from +23 to +1. At the same time, other sectors like transport, storage and hospitality also experienced significant declines.
Moreover, the report highlighted that nearly all employers (90%) expect their employment costs to rise due to NICs changes, with 43% predicting these costs will increase “to a large extent.”
Many businesses are also planning to respond to these increased costs by reducing staff (32%), raising prices (42%), or investing in automation (21%). However, a concerning 19% of employers plan to cut back on training expenses, which could hinder long-term productivity growth.