Businesses Struggle with Mounting Labor Expenses
Small businesses are reporting a sense of being “stuck in limbo” and “squeezed on all sides” due to escalating employment costs, according to an industry leader. A significant portion of firms, nearly half (47%), identify either increased National Insurance Contributions or higher National Minimum and Living Wages as the primary tax-related burden impacting their operations.
Compounding these domestic pressures, the ongoing conflict in the Middle East is also taking a toll. Data indicates that one in five family-owned businesses have halted recruitment efforts, and one in six have resorted to job cuts.
Call for Reduced Employment Burden to Stimulate Job Growth
Family Business UK is urging the government to prioritize reducing the cost of employment as a means to foster job creation. Neil Davy, CEO of the organization, stated, “Family businesses have been building Britain for generations but, right now, they feel stuck in limbo being squeezed on all sides by the permanently higher costs of employing people, and temporary cost increases from ongoing geopolitical uncertainty.”
Davy elaborated, “Family firms remain eager to grow employment, but cost and uncertainty are forcing them to make unpalatable choices—to cut back on recruitment more than they would like and, in some cases, reduce headcount. If we are to reverse this situation and allow businesses to create the opportunities workers need, there must be a renewed focus on reducing the burden of National Insurance Contributions along with careful management of the National Minimum and Living Wages.”
Youth Unemployment Crisis and Business Support Needs
The challenges for family businesses are further underscored by the current youth unemployment crisis, with approximately one million individuals aged 16 to 24 not engaged in education, employment, or training. Inheritance Tax also continues to present significant hurdles for the majority of family businesses, as revealed by recent research encompassing over 500 such enterprises.
Analysis of the research shows that more than two-fifths (41%) of businesses believe government assistance with high employment costs would be the most effective way to create new roles and recruit staff in the coming year. Additionally, 35% of firms are seeking greater stability and predictability in employment regulations.
Focus on Fairer Tax System Ahead of Budget
Davy emphasized the vital role of family businesses, stating, “Family businesses are the lifeblood of local economies across the country and are critically important to thriving communities.”
With the national Budget approximately five months away, he urged, “The Government must look at the priorities highlighted in this study and create a fairer—and simpler—tax system that supports family businesses and unlocks their potential to deliver the increased opportunities and economic growth our country needs.”
