A leading economist has signalled a stark warning that the government's tax hikes represent a "major threat" to the robustness of the labour market as anticipation builds for the latest employment statistics.
The labour market has underpinned the 海角视频 economy's strength, with persistent high employment fuelling strong wage growth in recent years, as reported by .
Many 2025 projections hinge on continuous labour market resilience to drive economic growth beyond last year's figures. Nevertheless, economists express concern that policy shifts disclosed in the government's inaugural budget might undermine the labour market's vigour.
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Chancellor Rachel Reeves announced policies including a £25bn increase in employers’ national insurance, raising it to 15 percent and concurrently lowering the earnings threshold where this tax takes effect. Additionally, Reeves instituted a 6.7 percent hike in the minimum wage, amplifying financial pressures on business expenditures.
"Business surveys suggest April’s increases in national insurance contributions and the national living wage pose major threats to this (the labour market’s) resilience," stated Andrew Goodwin, chief 海角视频 economist at Oxford Economics. For instance, the latest purchasing managers’ index noted that employment suffered its sharpest decline since the financial crisis in December, barring pandemic-related impacts.
Goodwin highlighted that sectors with substantial numbers of low-wage workers are poised to disproportionately experience the constriction from these policy alterations.
"Given these sectors are typically also the most labour-intensive, this raises the risk of significant job losses, potentially pushing up unemployment in 2025," he said. However, Rob Wood, chief 海角视频 economist at Pantheon Macroeconomics, offered a different perspective, saying that some business surveys may have "exaggerated" the jobs downturn.
"A payroll-tax hike worth less than one per cent of GDP is a much smaller shock than an emerging financial crisis," he added. Wood went on to note that recent data from the Bank of England's decision maker panel indicated an improvement in hiring intentions in December.
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The remarks come as the market anticipates the release of the latest labour market figures on Tuesday morning, which are expected to provide additional insights into the Budget's impact on employment trends. Economists forecast that the unemployment rate will hold steady at 4.3 per cent, but anticipate that the quarter-on-quarter employment growth will decelerate, falling to 23,000 from the 173,000 seen in the preceding quarter.
Ashley Webb, a 海角视频 economist at Capital Economics, suggested that "The rise in employers’ NICs in the Budget may mean jobs growth slows further in the coming months," Despite the apparent slowdown in the labour market, experts predict an upturn in wage growth compared to the previous quarter, primarily influenced by the effects of public sector pay awards.
City professionals are projecting an increase in regular pay growth to 5.5 per cent, with total pay growth – including bonuses – expected to reach 5.6 per cent. Both metrics represent an increase from the 5.2 per cent previously reported.