There has been a significant fall in hiring confidence and a sharp increase in redundancy intentions over the past quarter according to new research.

The survey of more than 2,000 UK employers by the Chartered Institute of Personnel and Development showed that the decline was to the impending increases to employer national insurance contributions and the national minimum wage, announced in the Budget in October 2024.

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Almost a third of businesses planned to reduce their headcount through redundancies or recruiting fewer workers, the survey found, while two in five (42%) were likely to raise prices in response to the increased employment costs.

A quarter of businesses (24%) said they were cancelling or scaling down plans for investing in or expanding their business.
Employer concerns were also reflected in the survey’s net employment balance – which measures the difference between employers expecting an increase in staff levels and those expecting a decrease in the next three months. It fell significantly overall, from +21 last quarter to +13 this quarter, and from +24 to +16 in the private sector.

Peter Cheese, chief executive at the CIPD, the professional body for HR and people development, said the figures were evidence of “the most significant downward changes in employer sentiment we’ve seen in the last 10 years, outside of the pandemic.”

He added it was vital ministers now set out how they would help businesses to support growth and investment. He said it was “important this support is felt across the economy. Our data shows it’s the everyday economy sectors, such as retail and hospitality that will be particularly affected by impending increases to employment costs.”

Further key findings from the report included:

• Some sectors saw a marked drop in confidence through their net employment balance, notably: retail from +23 to +1; transport and storage from +28 to +11; hotels, catering and restaurants (hospitality) from +18 to +7 and construction from +43 to +27, which is particularly notable given large-scale infrastructure plans for the UK.
• Overall, one in four (25%) employers planned to make redundancies in the three months to March 2025. This was a significant increase from 21% last quarter and the highest number seen in the past 10 years outside of the pandemic.
• Nine in 10 organisations expected employment costs to increase due to NICs changes. 43% of employers believed the increase in the rate of NICs will increase their employment costs “to a large extent”.
• One in four (24%) employers believed their employment costs would increase largely due to the rise in the National Living Wage to £12.21.
• One in five (19%) planned to cut back on training expenditure.

Cheese added that ministers should fast-track consultation with employers on the design of the new growth and skills levy and other changes to skills policy to help organisations up-skill their workforces and to tackle technical skills shortages holding back the economy.”

In contrast to the CIPD findings, in January the Recruitment and Employment Confederation found that the impact of October’s Budget on employer confidence was “not as bad as feared”. Its survey of 634 UK employers found that employers’ perceptions of the UK’s economic performance were better in December than in November. However, overall, businesses were still holding back on recruitment.

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