The Autumn budget isn’t the only risk for redundancies

The Labour government’s announcement around its Autumn budget has left many businesses feeling apprehensive about the foreseeable future. 

With concerns around hiring freezes, raising prices for customers and lowering pension contributions, businesses are left to wrestle between survival and maintaining their workforce and customer base. 

What’s more, the risk of workplace redundancies is also looming. Given the number of mass layoffs in 2024 alone, uncertainties over job security are likely to continue following the budget’s impact on businesses.

But while many may point to the government’s latest taxation rises, other factors are also forcing businesses to plan redundancies in the coming year. 

The sting of NIC and NMW increases

Let’s first address the elephant in the room, which is the rise in National Insurance contributions (NICs) for employers, as well as the increase in the National Minimum Wage (NMW).

Businesses have been quick to dispute the government’s decision to raise these taxes for the 2025 financial year – particularly hospitality and retail businesses that expressed concerns over raising prices, job losses and even business closures.

While NI rates will remain the same for employees – thanks to Labour’s “working people” pledge – staff aren’t completely out of the woods, as increased taxes for employers are likely to result in more workplace layoffs in the new year.

According to research by Evelyn Partners, 26% of businesses plan to carry out a wave of redundancies in 2025.

Claire Burden, Head of the Advisory Consulting team at Evely Partners, said: “It’s deeply worrying that so many business owners are expecting to need to make redundancies over the year ahead. Cash reserves for many businesses are under pressure in the current environment and we can therefore expect to see some default on their debts.”

Consumers are becoming more budget-conscious

The cost of living crisis is also playing a part in next year’s expected redundancies, with 31% of businesses citing this as the primary reason for carrying them out.

Burden commented that business owners have been “feeling the heat” even before the Autumn budget was announced and that the impact of rising inflation in recent years is “still hitting businesses hard”.

“Many industries have not been able to pass on the full extent of their cost increases and this has left some firms fighting for their survival,” she said. “Business owners face a perfect storm as the lingering cost of living crisis has prompted consumers to tighten their spending.”

Research by Barclays revealed that 70% of UK consumers are looking for ways to get more value from their weekly shopping or to reduce how much they spend. Shoppers in the UK were also reported to be the most budget-conscious in Europe, with 40% of Brits citing price as the most important deciding factor when making a purchase.

Competition is tough

One of the biggest challenges of starting a business is how you can stand out from the others. 

But lately, tough competition has been a significant setback for many small businesses and small-medium enterprises (SMEs) – so much so that 23% of businesses cite increased competition as a negative impact, which could ultimately lead to redundancies. Moreover, 44% of small businesses reported that they were struggling due to competition from larger organisations. 

The challenge doesn’t just come from attracting customers either. A study by XpertHR revealed that the same percentage of businesses are struggling to match competitor pay and benefits packages, in turn losing out on the best talent to other organisations.

Poor quality applicants and skills shortages were reported as the primary issues HR professionals have faced in the recruitment process. A small business is more likely to struggle if it isn’t able to hire good-quality candidates, and as a result, these struggles could lead to layoffs in the long run.

What else could cause workplace layoffs?

The points above are only part of the ongoing issues that could lead to redundancies. Other negative factors businesses have reported include: