The number of Welsh firms expecting to reduce staff numbers has increased following Rachel Reeves’ Budget that will see a rise in employer national insurance contributions as well as minimum wage rates.
The latest quarterly economic survey from Chambers Wales shows fewer firms recruited during the final quarter of 2024 than in Q3. Of those who did recruit, 65% experienced difficulties especially when recruiting for professional, managerial, skilled manual and technical roles.
The survey also questioned firms on measures announced in the last autumn’s Budget such as the increase to the National Minimum Wage and National Living Wage and employer national insurance contributions from April.
Around half of the respondents revealed that the increases to £10 and £12.21 an hour for the minimum wage and living wage respectively would not affect their business. However, other businesses said that they would have to either halt recruitment plans, approach recruitment with caution or increase the prices of their services.
Businesses also expressed their hesitation to hire young people, with many reducing the numbers they plan to recruit in 2025. The overall number of firms expecting to reduce their workforce rose to 24% from 15% in the previous quarter.
Some 17% of firms surveyed increased the size of their workforce over the last quarter with 17% also expecting their workforce to increase in the next quarter. More than half of the businesses surveyed (59%) expect the size of their workforce to remain constant in the next three months.
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Gus Williams, interim chief executive at Chambers Wales South East, South West and Mid, said: “Taxation has become the external factor causing the most concern for businesses in Wales and the measures announced in the Budget such as the increase to employers’ national insurance contributions, combined with rising labour costs and changes to employee rights, have not surprisingly driven those concerns.
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“Our research show that recruitment remains a persistent challenge for businesses in Wales, and this continued in Q4 with a rise in the number of firms expecting their workforce to decrease and fewer investing in training. One of the impacts of the tax and National Minimum Wage increases looks to be a reduction in expected entry level recruitment this year.
“As businesses review their budget planning in preparation for upcoming changes, more support is needed to tackle barriers to growth such as access to skills development and learning pathways to help companies attract and retain talent with the right skills for their sectors.”