UK Payrolled Employees Drop By Almost 80,000 Amid National Insurance Hikes

In a concerning trend, the number of payrolled employees in the UK declined by nearly 80,000 in March, signaling a potential fallout from recent increases in employer National Insurance contributions, a move initiated by the Labour government. This decrease to 30.33 million marks the first such drop since April 2021. The alterations in the tax structure, introduced by Rachel Reeves' Autumn Budget, have already prompted businesses to seek ways to cut wage costs ahead of their implementation on April 6th. Despite this drop, the official unemployment rate remained static at 4.4%, with London witnessing a notably higher rate of 6.5%—the highest across all UK regions. Analysis suggests that the increased costs tied to taxes and minimum wage may be leading firms to reduce their workforce, according to Capital Economics. Furthermore, wage growth continues to outpace inflation, yet the declines in vacancies for over eight quarters coupled with the rising National Insurance contributions indicate a precarious job market. As Thomas Pugh from RSM UK noted, this significant trimming in workforce could make a rate cut from the Bank of England very likely in the near future. As businesses navigate these pressures amidst global uncertainties, the real measure of economic health will be seen in the sustained employment landscape, which remains to be fully understood.