National insurance hike creating ‘powder keg’ of costs, says BCC

The overwhelming majority of businesses say the rise in employer national insurance (NI) contributions will force them to change their plans.

This according to new research from the British Chambers of Commerce (BCC) and professional services firm AAB, who surveyed over 1,200 businesses – mostly small and medium-sized businesses.

With under six weeks until the NI rise comes into effect, 82 per cent of firms said the tax hike would cause them to rethink.

58 per cent believe that it will impact their recruitment plans and 54 per cent that it will affect their prices.

Only 18 per cent feel the rise is unlikely to cause any change.

The survey also showed that most firms are dissatisfied with the policy making process, with over three quarters saying they didn’t feel the impacts of new policies were being properly assessed.

Updates to employment rights legislation are cause for concern too, as more than half of companies said the government’s new plans for statutory sick pay would force a change in plans.

Alex Veitch, director of policy at the BCC, said: “The clock is ticking down to the NI rise, and firms are already telling us they are sitting on a powder keg of costs.  

“Most are saying they’ll have to raise prices and reconsider recruitment plans.

“That’s unlikely to create an environment that fosters growth – the key priority for government.

“Ministers need to read the room and recognise the impact this tax hike will have.  

“The government has pledged to retain the NI tax position through the life of this parliament, but our new evidence should give pause for thought.

“We need the government to publish a wider tax roadmap for business, setting out the direction of travel for costs like national insurance and business rates. 

“Business rate reform must be an urgent priority, creating a system that incentives investment.

“Getting on with planning and skills reforms will also remove blockers to growth.  

“Our survey also shows growing concern about aspects of the government’s employment rights legislation.

“Some of the proposals are completely disproportionate to the reality of how businesses are operating.

“Ministers should allow more time for consultation with business about the policy detail and implementation. Government must listen and think again. 

“We welcome recent announcements on infrastructure projects which will help boost local economies and supply chains across the country.

“The upcoming strategies on industry, infrastructure and trade are also vital to help shape the economy for the long-term.  

“But that’s small comfort for businesses feeling the cost pressure of NI right now.

“With prices likely to rise and recruitment challenges ahead, the outlook remains deeply concerning.”