"Each additional individual who is unemployed represents both a reduction in the Government's tax take and an increase in cost of providing social support. There has been a lot of speculation and commentary on the size of the UK's 'fiscal black hole' in recent weeks and the increase in the unemployment rate will only compound the challenges faced by the Chancellor, Rachel Reeves as the Budget looms ever closer."
"The Government's own decisions are a factor driving increased unemployment. The increase in employer's National Insurance Contributions (NIC) from April 2025, the ongoing increase in the National Minimum Wage, up by 37% since April 2021 and the forthcoming introduction of 'day 1' employment law protections for new employees have made staffing more expensive for businesses, causing them to cut jobs and abandon plans to increase employee numbers."
"While the focus of the last few weeks has been on what tax rises Rachel Reeves may be introducing in her Budget later this month, it is vital that she uses the Budget to lay the foundations for stronger economic growth over the coming years, as otherwise she will be 'fiddling whilst Rome burns'."
UK unemployment rose from 4.2% when the Government took office in 2024 to 5% according to ONS figures. Each additional unemployed person reduces government tax receipts and raises the cost of providing social support. The higher unemployment rate worsens existing fiscal pressures and complicates Budget planning for the Chancellor. Government policy choices — including higher employer National Insurance Contributions from April 2025, a 37% rise in the National Minimum Wage since April 2021, and planned 'day 1' employment protections — have increased staffing costs, prompting businesses to cut jobs and halt hiring. The Budget must prioritise policies that restore sustainable economic growth.
Read at London Business News | Londonlovesbusiness.com
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