Reported by 1 source

The short version

  • Companies in Devon report pausing recruitment plans due to the cumulative burden of recent National Insurance hikes and minimum wage increases.
  • Hospitality and small business owners are lobbying for VAT reductions and lower employer taxes to stimulate spending and hiring.
  • The Treasury maintains it is supporting growth through existing measures, while the Chancellor faces pressure to address historic borrowing costs.

British businesses are increasingly hesitant to expand their workforces as they await the upcoming fiscal statement from Chancellor John Healey. Industry representatives argue that the current cost of employing staff has reached a level that discourages new hires, particularly among small and medium-sized enterprises. This reluctance to recruit comes at a critical juncture, with the government preparing to outline its economic strategy amid concerns over high borrowing costs.

The hesitation is driven largely by policy changes implemented in recent years. In 2024, National Insurance contributions for employers were raised to fifteen percent on salaries exceeding five thousand pounds, an increase from the previous rate of thirteen point eight percent on earnings above nine thousand one hundred pounds. Simultaneously, the legal minimum wage for workers over twenty-one rose to twelve point two-one pounds per hour starting in April 2025. These adjustments have created a compounded financial pressure that many firms say they are still absorbing.

News Journal

Tim Randell, who operates Links Publishing in Tavistock, Devon, described how these costs have directly impacted his expansion plans. He noted that despite having two vacant positions he intends to fill, the expense of taking on new employees has forced him to hold back. Randell characterized the recent fiscal environment as one defined by increasing taxes and expenses, which he believes discourages hiring young workers and stifles business growth.

Michelle Bunker of WGP Maintenance in Plymouth echoed these sentiments, stating that her primary message for the Chancellor is a clear request for National Insurance contributions to begin decreasing. She emphasized that reducing the cost of employment is essential for businesses looking to stabilize and grow. The sentiment appears widespread among local firms, with many expressing frustration over the cumulative impact of policy shifts introduced over the last two budget cycles.

The hospitality sector is also facing significant headwinds. Hotel managers and industry advocates are calling for a reduction in Value Added Tax for pubs and restaurants from twenty percent to ten percent. Pete Adams, general manager of the Moxy Hotel in Plymouth, argued that such a cut would allow businesses to pass savings to customers, potentially increasing footfall and overall spending. He suggested that this boost in activity could generate tax revenue comparable to current levels, despite the lower rate.

Beyond commercial enterprises, charities are feeling the strain of the broader economic climate. Elsbeth Hallam from Hugs Children's Cancer Charity noted that individuals are tightening their spending, which directly affects fundraising capabilities. This reduction in donations limits the number of families the charity can support, illustrating how cost-of-living pressures ripple through the non-profit sector as well.

Government officials maintain that they are actively supporting business growth. A Treasury spokesperson highlighted existing measures such as business rates cuts, a cap on corporation tax, and specific National Insurance relief for hiring younger workers and apprentices. They emphasized that the Chancellor is providing breathing space for investment, though they declined to comment on specific rumors or proposals ahead of the official announcement.

Chancellor Healey has acknowledged that government borrowing costs remain at historic highs but has not ruled out further tax increases. The tension between fiscal responsibility and the need to stimulate economic activity will likely define the upcoming Budget. Business leaders like Helen Wylde-Archibald of the Devon Chamber of Commerce are urging a supportive approach, arguing that relief measures could position regions like Devon for future growth rather than leaving them behind in an evolving economic landscape.

Sources behind this briefing

Go to the original reporting