National Insurance hike creating a ‘powder keg’ of costs as Chamber raises concerns with Minister

Businesses around the Humber are being forced to rethink their strategies in fear of the imminent increase in employer National Insurance contributions which is going to put a huge strain on the finances of many SMEs.

Members of the Hull & Humber Chamber of Commerce’s Area Councils in Hull and East Riding, Goole and North and North East Lincolnshire have all been reporting that the increased contributions costs are causing genuine concerns at a time when inflation and energy costs are also on the rise.

The messages from Humber businesses reflect the findings of a national survey of 1,200 businesses conducted by the British Chambers of Commerce.

The overwhelming majority of businesses say the rise in employer National Insurance contributions will force them to change their plans, according to the research by the BCC Insight’s Unit, in partnership with professional services firm AAB. 

With less than six weeks until the NI rise comes in, 82% of firms say the tax hike will cause them to rethink. With 58% of surveyed businesses saying it will impact recruitment plans, and 54% that it will affect their prices. More than a third of firms suggest investment (36%) and day-to-day operations (30%) will be impacted. Only 18% feel the rise is unlikely to cause any change.

Hull & Humber Chamber’s Director of External Affairs, David Hooper, said: “Businesses across the country are facing huge cost pressures from all sides and our members are telling us these increases are causing real concern.

“Although we’ve seen a recent cut in interest rates, inflation is rising and only today it was announced the cost cap on energy prices had gone up more than was expected.

“Firms already under pressure are being forced to rethink their future plans, scaling back on training and putting the brakes on recruitment and investment.

“We are meeting two Government Ministers in the next two weeks in Hull and will be voicing these concerns on behalf of our members directly.”

More than 1,200 businesses took part in the online research, carried out between Monday 20 January and Monday 10 February. 91% of the firms who took part were SMEs (fewer than 250 employees).  

•           82% of firms surveyed say the National Insurance (NI) rise will impact their business

•           Most responding businesses say the increase in NI will impact recruitment (58%) and prices (54%) 

•           Over three quarters (79%) of businesses do not feel the government has properly assessed the impact of its new policies

•           The majority of firms (77%) are worried about the speed policy changes are being made

•           55% of firms say plans to change statutory sick pay will impact either their investment, recruitment, prices or day to day operations.  

The survey shows most firms are dissatisfied with the policy making process. Over three quarters (79%) of responding businesses do not feel the impacts of new policies are being properly assessed and only 14% believe they are. A similar proportion, 77%, do not feel changes are moving at the right pace, while 16% do. But businesses were more likely to say they understood the rationale for policies – 42% said they understand why new policies are being made, although a larger proportion, 52%, did not. 

The findings also highlight significant concern about elements of the proposed Employment Rights legislation. The majority (55%) say the planned changes to statutory sick pay will force them to change their plans, including 33% saying it will change recruitment plans. Against this, 45% think that it is unlikely to cause their organisation to make any changes. 

Just under half (45%) of businesses say ‘right to switch off’ proposals will impact their plans, including 36% feeling it will affect day-to-day operations. Just over half (55%) do not foresee it causing them to make any changes.   

Alex Veitch, the Director of Policy at the British Chambers of Commerce said: “The clock is ticking down to the National Insurance rise, and firms are already telling us they are sitting on a powder keg of costs.  

“Most are saying they will 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 National Insurance 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 incentivises 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.

“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 National Insurance right now. With prices likely to rise and recruitment challenges ahead the outlook remains deeply concerning.”