More than 300,000 businesses set to cut jobs due to the Chancellor’s employer National Insurance

New analysis reveals over 300,000 SME owners are planning to cut jobs in response to the Government’s planned rise in employer National Insurance contributions (NICs), due to come into effect in April.

The survey of owners of small and medium-sized businesses by iwoca, one of Europe’s largest SME lenders, finds that 22% of SME leaders say they will reduce company headcount to cope with the hike. With 1.4 million employer SMEs in the UK, this could mean over 300,000 firms cutting jobs nationally.

Employees who remain on the payroll of small and medium-sized businesses are also expected to feel this pinch. Over a third (35%) of SMEs say they will slow hiring plans as a result of an increased NICs burden, 31% expect to have to reduce pay rises, and over a quarter (27%) will have to delay promotions.

Rising costs force SMEs to raise prices 

Small and medium-sized firms are anticipating blows to balance sheets with the hike in NICs. Two-thirds (66%) of SME leaders estimate the higher NICs rate will cost them each over £10,000. These costs are expected to be passed onto customers — a majority (59%) of SME owners expect to increase prices.

While the Government has increased the employment allowance to help offset the higher NICs rate, over a quarter (28%) of SMEs say the measure will not provide sufficient relief. This exceeds the 21% who believe the allowance will significantly offset the additional costs.

Tax Britannica?

The news comes as the tax burden on UK businesses continues to mount. Seven in 10 (69%) SME owners say that the rate of taxation on their business is high — fewer than 3% think taxes are low.

Without the NICs increase, a third (33%) of SME leaders say they would invest more in their businesses or lower prices – stimulating growth instead of stalling it.

Seema Desai, iwoca’s Chief Operating Officer, said, “Based on our survey, rising employer NICs are likely to result in slower wage growth and job losses among SMEs. While the increase in employment allowance provides some relief, higher costs overall could limit SMEs’ ability to invest and grow – and that’s something we need them to do to help boost economic growth in the UK.”