The Treasury’s punitive regimen has forced business across the board, but particularly in hospitality and retail, to cut back on recruitment as a means of survival. That definitely wasn’t in the government’s growth strategy when it took power last July. But it suddenly appeared all over it when the chancellor slapped tax hikes on employers NIC. Is this now a case of reap what you sow?
The fallout from Labour’s disastrous Budget continues apparently unabated: with a new raft of figures showing the number of job vacancies falling every month since October, as businesses struggle to operate amidst rising costs.
A new analysis from the Office for National Statistics said that, surprise surprise, the industries which had seen the biggest hit to the number of available positions were hospitality and retail, both of which are particularly exposed to the one-two-punch of both an increase in the minimum wage and lowering of the threshold at which National Insurance Contributions kick in.
Indeed, UKHospitality chair Kate Nicholls said her industry now accounts for nearly half (45 per cent) of total job-losses incurred by the UK economy since the autumn Budget, amounting to a reduction of around 84,000 staff.
Apart from the fact that the government was warned that NIC rises will curb recruitment, warned again and warned virtually every day since October about the dangers.
Many will say the government brought this on themselves; everyone will say, they’ve single-handedly brought this on all of us.
The biggest miscalculation of all is the government was totally dependent upon the broad based hospitality sector turbo charging the economy into growth. Now, it could barely charge a light bulb – thanks to hyper taxes and hyper-plus plus plus energy bills.
So, let’s break down some of the issues the the government has created.
Aside from 84,000 people in hospitality and retail losing their jobs since October, and presumably a flat-lining or even a net decline in NIC revenues, the rate of wage growth has also begun to slow, with the hike in weekly take-home pay dropping from 5 per cent to 4.6 per cent in the three months to June. With inflation hovering around 3.6 per cent, employees could be forgiven for barely noticing any increase in the power of their pay packets.
Perhaps the only good news to be had was that nationally, the unemployment rate has remained unchanged throughout the most recent quarter: floating around 4.7 per cent.
But that figure is still a four-year high: with the unemployment rate going into the pandemic at just 3.9 per cent.
“The UK’s post-pandemic labour market was red hot,” Hannah Slaughter, senior economist at think tank the Resolution Foundation told the Guardian earlier this week. “That period is officially over…the labour market is loose and getting looser, having shed 165,000 payrolled jobs over the past eight months.”
Casting his own set of gloomy runes, economics director Suren Thiru of the Institute of Chartered Accountants in England and Wales said the decline in wage growth was likely to continue throughout the rest of the year, attributing the trend to “softening economic conditions, rising redundancies and elevated staffing costs increasingly hinder pay settlements.”
What’s worse, with the Treasury still insisting that the nation is skint, Thiru predicted yet more government-imposed suffering for businesses in the short term.
“The UK jobs market is facing more pain in the coming months,” he remarked, “with higher labour costs likely to lift unemployment moderately higher, particularly given growing concerns over more tax rises in this autumn’s budget.”
At some stage, you’d think the government might have to start listening to business because without a thriving economy, they cannot deliver a social agenda of rising living standards and services.
Change tack, and tax, says Nicholls
Kate Nicholls chair UKHospitality
“These devastating job losses are a direct consequence of policy decisions at last year’s Budget, which have disproportionately hit the hospitality sector. The change to employer NICs in particular, was socially regressive and had a disproportionate impact on entry level jobs.
Without a change of tack from the government we could be looking at even more job losses in hospitality, when we should be bringing people into the jobs market.”
BBPA pleads government to reduce the “staggering” cost of doing business
Emma McClarkin CEO British Beer & Pub Association
“These stark figures are exactly the reason why the chancellor must look again at how to mitigate the shocking new employment costs so businesses can better plan and continue to employ staff they need, rather than staff they can afford.
We urge the government to reduce the staggering cost of doing business for our sector, including the urgent delivery of meaningful business rate reforms.”
