Cliff Nicholls operates two trampoline parks and indoor play centers, one in Tamworth in the West Midlands and the other in Bolton, Greater Manchester. He is already feeling the impact of the government’s recent budget measures, which have led him to halt further investment plans.
«The upcoming increases in the national minimum wage, along with the reduced thresholds for national insurance and the higher rate of employers’ national insurance, will have a significant effect,» Cliff explained. In response to rising business costs, including business rates and national insurance, he has already implemented drastic measures such as reducing opening hours and letting go of a senior staff member.
Policies like the National Living Wage (NLW) increase aim to support low-paid workers, but other changes may counteract these benefits. One significant change is the reduction in the salary threshold at which businesses must start paying employer’s national insurance contributions (NICs). Currently, employers start paying NICs when an employee earns over £9,100 per year. However, starting in April 2025, this threshold will decrease to £5,000, while the employer’s NI rate will rise from 13.8% to 15%.
Under the new system, an employer will pay nearly £800 more in NICs annually for an employee earning around £23,800 based on a 37.5-hour week at the new NLW. The rise in NICs will disproportionately impact employers of lower-paid workers, with varying percentages based on employee earnings.
Labour’s announcement of employment rights reforms, including extending statutory sick pay and enhancing protections against unfair dismissal, aims to improve working conditions but comes with a cost. The government estimates that these changes will cost businesses approximately £5 billion.
The reduction in business rates relief from 75% to 45% for retail, leisure, and hospitality businesses poses a significant challenge for Cliff. He anticipates a substantial increase in costs due to these budget changes, especially in business rates.
The impact of these changes on inflation is notable, with higher prices for food, goods, and services putting pressure on working people. Data from the Office for National Statistics shows a rise in inflation to 3% in January 2025, the highest level in 10 months. Many businesses foresee the necessity of raising prices due to the increase in national insurance costs and the NLW.
Businesses are facing tough decisions as a result of these changes, with signs of pressure already evident. Concerns have been raised about the impact on the workforce, particularly in sectors that employ a significant number of lower-paid workers.
Since the budget, there has been a decline in the number of payrolled employees in various industries, with manufacturing and hospitality experiencing significant drops. Additionally, voluntary liquidations and business closures have increased, reflecting the challenges businesses are currently navigating.
Despite the difficulties, the HM Treasury defends the budget measures, emphasizing the need for stability to support business growth and protect workers. They aim to kickstart economic growth and raise living standards by implementing measures to drive business investment and create wealth across Britain.
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