Labour's Employment Legislation and National Insurance Hikes Blamed for Rising Joblessness
Employment among 16 to 64-year-olds has slipped to 75 percent as national insurance increases and the controversial Employment Rights Act force businesses to cut back on hiring, according to business leaders and economic analysts. The labour market continued to weaken at the end of last year, with new Office for National Statistics data revealing unemployment climbed to 5.2 percent between October and December – marking the highest level since early 2021.
Employment Rights Act Could Further Deter Hiring
The Employment Rights Act, which passed into law in December and is being implemented in phases, could create additional barriers to employment according to industry experts. The legislation tightens regulations around zero-hour contracts and effectively bans 'fire and rehire' practices that some businesses have used to adjust workforce costs.
More than a third of firms surveyed by the Chartered Institute of Personnel and Development indicated these reforms will force them to curb hiring activities. "The imminent introduction of new employment rights legislation adds additional complexity to the picture," said Patrick Miles, head of people and work policy at the British Chambers of Commerce.
Rising Labour Costs Driving Hiring Decisions
Research by the British Chambers of Commerce reveals that 72 percent of businesses identify labour costs as their biggest financial pressure. Minimum wage increases have been particularly significant, with pay for 21 to 22-year-olds rising by 33 percent over three years to match the £12.71 hourly national living wage for older workers.
The rate for 18 to 20-year-olds has increased by 46 percent to £10 per hour and is scheduled to rise again to £10.85 in April. Andrew Wishart, senior UK economist at Berenberg, noted that "aggressive" minimum wage increases have caused lower-paid positions to disappear faster than graduate roles.
Young Workers Bear the Brunt of Job Market Challenges
Youth unemployment has reached an 11-year high, with 16 percent of 16 to 24-year-old jobseekers currently without work. Matthew Fell, director of competitiveness at BusinessLDN, emphasized that young Londoners are disproportionately affected by the UK's rising joblessness.
"The Government should keep a close eye on how last year's hike to employer national insurance contributions and minimum wage increase is impacting those at the start of their careers," Fell stated, urging policymakers to help reduce operating costs for businesses.
Business Leaders Call for Policy Reevaluation
Helen Dickinson, Chief Executive at the British Retail Consortium, told City AM that the Labour government "must think carefully about the implementation of the Employment Rights Act." She warned that introducing measures that could reduce flexible and part-time job availability would harm those seeking career entry points or returning to work.
Suren Thiru, economics director at the Institute of Chartered Accountants, described the UK jobs market as "coming apart at the seams" as spiralling labour costs push businesses from recruitment freezes to active job cuts. The Department for Work and Pensions declined to comment when contacted about the employment statistics and business concerns.
