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UK firms hit by rising employment costs

29 August 2017

UK firms hit by rising employment costsAround four in every five businesses have seen their costs increase this year through changes in employment legislation, according to new research.

Pensions auto-enrolment, the National Living Wage (NLW) and the Apprenticeship Levy have increased the cost base of businesses, according to a survey of more than 1,400 businesses by the British Chambers of Commerce (BCC) and Middlesex University London.

The rise in the National Living Wage (NLW) in April of this year has increased employment costs for 50% of UK companies. Firms in the North of England (55%) and the Midlands (51%) are more likely to be impacted by the National Living Wage than firms in the South (43%).

The BCC says action is needed to prevent unsustainable rises to the cost of doing business; it is calling on the Government to ensure no new upfront costs or taxes - which "sap investment, growth and recruitment potential" - are imposed on business for the remainder of this Parliament.

The key findings of the survey are:

  • 75% of businesses have seen an increase in costs because of pensions auto-enrolment;
  • 20% of businesses have seen costs increase from the introduction of the Apprenticeship Levy;
  • 38% of respondents said they will have to raise prices as the National Living Wage increases;
  • 73% of consumer-facing firms - in wholesale, retail, accommodation and foods sectors - have seen an increase in costs;
  • 56% of manufacturers and 41% of business-to-business services report higher costs;
  • 25% of businesses say they would respond to future planned increases to NLW by reducing pay growth for staff, 21% by reducing staff benefits and 20% by scaling back recruitment.

Jane Gratton, BCC head of business environment and skills, said: "At a time when employers across the country are facing acute skills shortages, it is vital that they have the resources and flexibility to invest in their workforce and the future needs of the business.

"Employment is just one element of the high upfront cost of doing business in the UK. It is the cumulative impact of all of these changes, and the pace at which they are being introduced, that causes the greatest concern and poses the biggest risk. There is little scope for firms to absorb any further costs without there being damaging effects on competitiveness, growth and opportunities for people in the workforce. The Government must ensure that there are no upfront further costs or taxes on businesses and entrepreneurs for the remainder of this parliament."

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