Zarah ChoudharyNew analysis revealed over 300,000 small and medium enterprise (SME) owners are planning to cut jobs in response to the Government’s planned rise in employer National Insurance contributions (NICs), due to come into effect in April.
The survey of owners of SMEs by iwoca found that 22% of SME leaders said 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.
Over a third (35%) of SMEs said they will slow hiring plans as a result of an increased NICs burden, 31% expected to have to reduce pay rises, and over a quarter (27%) will have to delay promotions.
Two-thirds (66%) of SME leaders estimated the higher NICs rate will cost them each over £10,000.
These costs are expected to be passed onto customers — with a majority (59%) of SME owners expected to increase prices.
While the Government has increased the employment allowance to help offset the higher NICs rate, over a quarter (28%) of SMEs said the measure will not provide sufficient relief.
This would exceed the 21% who believed the allowance would significantly offset the additional costs.
Seven in 10 (69%) SME owners said that the rate of taxation on their business is high — fewer than 3% think taxes are low.
Without the NICs increase, a third (33%) of SME leaders said they would invest more in their businesses or lower prices which meant stimulating growth instead of stalling it.
Seema Desai, chief operating officer at iwoca, 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.”
