CIPD survey shows sharp drop in business confidence

According to a new study, there has been a dramatic increase in redundancy plans and a fall in hiring confidence over the last quarter.

The Chartered Institute of Personnel and Development surveyed more than 2,000 UK-based employers and found that this decline was due to the impending increases in employer national insurance contributions and national minimum wages, announced in Budget 2024.

The survey revealed that almost a third (33%) of companies planned to reduce headcount by redundancies and/or hiring fewer employees, while 2/5 (42%) would likely raise prices to compensate for the higher costs associated with employment.

One quarter (24%) of companies said that they had cancelled or scaled back plans to invest in or expand their business.

The survey’s net balance of employment – the difference between employers who expect an increase in their staff and those who expect a decrease – also showed employer concerns. The net employment balance fell from +21 to +13 in the last quarter and from +24 – +16 for the private sector.

Peter Cheese, CEO of the CIPD (the professional body for HR and People Development), said that the figures showed “the most significant decline in employer sentiment outside of the pandemic we’ve seen over the past 10 years.”

He said that it is important for ministers to now outline how they will help businesses support growth and investments. He stressed that it is important for this support to be felt throughout the economy. “Our data indicates that the everyday economy, including retail and hospitality, will be most affected by the impending increase in employment costs.”

The report also includes:

• Some sectors experienced a significant drop in confidence, as measured by their net employment balance. These include: retail, from +23 down to +1, transport and storage, from +28 up to +11, hotels, catering, and restaurants (hospitality), from +18 down to +7, and construction, from +43 up to +27. This is especially notable, given the UK’s large-scale plans for infrastructure.
• One in four employers (25%) planned to lay off employees in the three-month period leading up to March 2025. This is a substantial increase over the 21% reported in the last quarter, and is the highest number outside of the pandemic seen in the last 10 years.
• Nine out of ten organisations anticipated that employment costs would increase as a result of NICs changes. The increase in NICs rate is expected to increase employment costs by 43%.
• One-fourth (24%) of employers thought their costs for employment would rise primarily due to the increase in the National Living Wage from PS12.21 to PS12.21.
• One fifth (19%) of respondents planned to reduce their training budget.

Cheese said that Ministers should speed up consultations with employers about the design of the growth and skills levies and other changes in skills policy, to help organisations improve their workforces as well as to tackle the technical skills shortages that are holding back the economy.

Contrary to CIPD’s findings, the Recruitment and Employment Confederation reported in January that the Budget of October had a ” less negative impact on employer confidence than feared“. In a survey of 634 UK companies, the results showed that employers had a more positive view of the UK economy in December compared to November. Businesses are still being cautious about hiring.

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