UK employers scaled back hiring to the lowest level since the pandemic at the start of this year as Rachel Reeves’s £25billion National Insurance raid took its toll.
Just 20 per cent of firms increased their workforce in the first quarter, the British Chambers of Commerce (BCC) found, the lowest level since the first three months of 2021.
Business leaders have said the rise in employer taxes could lead to job losses, lower wages and price rises this year.
The BCC’s survey of more than 5,000 businesses also revealed 17 per cent shrank their teams in the quarter.
Major firms to have axed jobs in the wake of last year’s Budget include Sainsbury’s, Tesco, BT and Santander.
And there are fears that more could follow after the rise in employer National Insurance contributions came into force on Sunday.
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The hike increases the employer’s rate from 13.8 per cent to 15 per cent. But the Chancellor also cut the threshold at which they start paying it – from earnings of £9,100 to just £5,000.
She has since been warned that the ‘jobs tax’ poses a threat to part-time workers, who are now more expensive to employ.
Bosses are also concerned that the Government’s proposed Employment Rights Bill will make it harder to recruit and retain staff.
Consumers could feel the pinch too, as 73 per cent of firms told the BCC that higher costs created pressure to raise prices.
Jane Gratton, the BCC deputy director of public policy, said: ‘Firms are struggling under the weight of skills shortages, recruitment difficulties and spiralling employment costs.
‘There are signs of businesses pausing recruitment plans, scaling back training investment and, in some cases, reducing the size of the workforce. The likely impact on job opportunities and business growth is worrying.
‘Firms are facing higher bills from the rise in both employer National Insurance contributions and the minimum wage. The full impact won’t be seen until later this year.
Tory business spokesman Andrew Griffith said: ‘As if more proof was needed, this shows the Government once again that their jobs tax and upcoming additional red tape on employers is chilling the jobs market faster than a nitrogen ice bath.
‘Starmer needs to get serious about growth, starting with shelving Labour’s disastrous Employment Rights Bill.’
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