UK businesses cut jobs at fastest pace since 2021, BoE survey shows

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UK businesses cut jobs at the fastest pace for four years and reported the worst employment outlook since the pandemic, pointing to the continuing impact of chancellor Rachel Reeves’ decision to raise payroll taxes.

British companies cut employment by an annual rate of 0.5 per cent in the three months to August, the worst figure since 2021, according to a Bank of England survey of chief financial officers published on Thursday.

Last month, businesses also expected to cut employment by 0.5 per cent in the year ahead, the lowest reading since October 2020, when the economy was starting to recover from the hit of Covid-19 and some restrictions were still in place.

Businesses have blamed tax increases in Reeves’ first Budget last October for the pullback in hiring, which has been reported in a string of other surveys.

A £25bn increase in national insurance contributions, announced in the fiscal event, took effect in April along with a rise in the minimum wage.

Nearly half of companies surveyed by the BoE said they were cutting the number of employees as a result of the change to NI contributions.

Some 20 per cent reported lowering wages and 34 per cent said they were increasing prices, according to the survey. Two-thirds of businesses reported lowering profit margins.

As ministers confront a hole in the public finances that some economists estimate at £20bn, the Treasury is examining a host of tax increases ahead of Reeves’ second Budget on November 26.

Trade unions have called for taxes on bank profits, gambling and wealth, but executives and industry bodies have warned against fresh rises.

Rob Wood, economist at the consultancy Pantheon Macroeconomics, said the cut in employment by UK companies was “in short . . . national insurance contributions hikes. They are proving to be a supply shock that raises inflation and cuts jobs”.

“Firms are struggling to cut wages in response to payroll tax hikes, and having to cut jobs,” he added.