Dr Liz Cameron CBE, CEO, Scottish Chambers of Commerce
Thousands of people face losing their jobs as a result of a “significant” tax rise which was introduced, the chief executive of Scottish Chambers of Commerce has warned.
Liz Cameron said that, although increasing the national insurance contributions (NICS) paid by employers to 15% aims to boost UK revenue, it will also lead to the closure of many businesses.
The rise is part of measures previously announced by Chancellor Rachel Reeves.
Ms Cameron said: “We repeatedly warned that the employer NICS increase would directly impact the bottom line for hard-pressed businesses – particularly those in hospitality – and the only certain growth would come in costs and job losses. Sadly, that prediction has become a reality.”
Significant increases in employment costs will be introduced next week which will force businesses to close, with potentially thousands of people being made unemployed.
Whilst the aims are two fold and understandable – to raise UK revenue and bolster the pay of those on the minimum wage – they will not deliver much needed economic growth and jobs.
Employer National Insurance Contributions will rise to 15% from April 6 as part of Chancellor Rachel Reeves’ measures she announced in her first ‘budget for business’ which was aimed at stimulating economic growth.
It may have seemed like a small burden on business when Downing Street was pulling together October’s revenue-raising Budget, but it demonstrated a lack of understanding of business needs and a deaf ear to our concerns.
We repeatedly warned that the employer NICS increase would directly impact the bottom line for hard pressed businesses – particularly those in hospitality – and the only certain growth would come in costs and job losses.
Sadly, that prediction has become a reality.
SCC’S research on the economic outlook for Scottish business highlights that growth lacks momentum, with weak productivity and employment forecasts. It emphasises that a strategic focus on workforce development is essential for future growth.
Other challenges specifically facing Scotland include skills shortages and staffing problems – where the skills gap and lack of a national strategy for fixing them through training are limiting growth potential in key high growth sectors such as engineering, information technology and life sciences. This challenge is further exacerbated as we expect employers to cut back on job advertisements as a direct result of the increased costs to hire staff.
It comes as business will feel the full effect from tomorrow of the increase of almost a pound an hour in the minimum wage for those aged 21 and over – from £11.44 to £12.21. For those aged 18 to 20, the increase is even more, at £1.40 an hour.
While we agree with the sentiment and recognise the difference the increase will make to many on lower pay, for businesses where labour costs are high relative to revenue, such as the hospitality trade and many others, they will be hardest hit.
Wetherspoon boss Tim Martin takes a no-nonsense, tell-it-as-it-is approach and paints a clear picture of what these changes mean to business . He says the increase in employer NICS and the rise in the minimum wage will cost each of his 796 pubs an extra £1,500 a week.
That is a message we are hearing loud and clear from so many of the 12,000 Scottish businesses we represent. Those where the margins are already challenging are warning it will either force them to close or cut staffing numbers and hours. Many have already cut back ahead of tomorrow’s change.
These are hardly the conditions for growth we were promised and which we so urgently need.
Our members understand the changing and difficult fiscal conditions the Government is currently facing but making tough choices should not be at the expense of businesses, who drive economic growth and job creation.
These challenges were laid bare in the Chancellor’s Spring Statement as we were told growth for 2025 would be halved. However, the Chancellor’s focus on the efficiency of government spending represents a bold step. Reducing costs and boosting productivity are things which businesses must think about on a daily basis, and it is right that the Chancellor should treat public finances in the same way. As we know in business – it is not only about the income, but the impact of what we are spending.
Businesses need support, now more than ever with the double whammy of higher employer NICS and minimum wage levels.
Employment remains the most significant cost pressure and impacts recruitment, retention and training. And for staff, there is a very real prospect that much of the rise in employers’ NICS will be reflected in lower pay rises and reduced employer pension contributions.
One overdue and welcome step would be a VAT cut for hospitality, retail and tourism. As Scotland’s biggest business organisation, we have repeatedly called for both a cut in VAT and extra business rates relief in Scotland.
The latter is in the hands of the Scottish Government, and they only need to look at the positive impact of the reform of business rates in England for further evidence of why our current system fails to reflect the pressures and trading reality for many businesses. It is unfair, punitive and makes it ever harder for our high streets to compete with online retailers.
Both moves would not only support businesses facing rising costs, but boost footfall and consumer spending as well. Businesses are struggling and the last thing they need is a growing cost burden amid continued uncertainty.
SCC remains open and willing to work with government to help deliver the solutions to best protect businesses against challenging economic headwinds, and create much-needed jobs and growth. Next week will reveal just how damaging these measures will be when the hard reality for employers and their employees takes hold.
Originally published in The Herald on 31/03/2025, sourced from PressReader.com
