More than 300,000 small business owners are planning to cut jobs in response to the Government’s planned rise in employer National Insurance contributions due to come into effect in April.
A survey of owners by one of Europe’s largest SME lenders, found that 22 per cent of SME leaders say they will reduce company headcount to cope with the hike. With 1.4 million employer SMEs in the UK, this could mean over 300,000 firms cutting jobs nationally.
Employees who remain on the payroll are also expected to feel this pinch. Over a third of bosses say they will slow hiring plans as a result of an increased NICs burden, ^This will mean reduced pay rises or delays to promotions.
Many, according to iwoca are anticipating blows to balance sheets with the hike. Two-thirds of them estimate the higher NIC rate will cost them at least £10,000 each. These costs are expected to be passed on to customers.
While the increase in employment allowance provides some relief, higher costs overall could limit SMEs’ ability to invest and grow
While the Government has increased the employment allowance to help offset the higher NICs rate, over a quarter (28%) of SMEs say the measure will not provide sufficient relief. This exceeds the 21% who believe the allowance will significantly offset the additional costs.
The news comes as the tax burden on UK businesses continues to mount. Seven in 10 (69%) SME owners say that the rate of taxation on their business is high — fewer than 3 per cent think taxes are low.
Without the NICs increase, a third say they would invest more in their businesses or lower prices stimulating growth instead of stalling it.
COO Seema Desai said: “Based on our survey, rising employer NICs are likely to result in slower wage growth and job losses among SMEs.
“While the increase in employment allowance provides some relief, higher costs overall could limit SMEs’ ability to invest and grow – and that’s something we need them to do to help boost economic growth in the UK.”
