Industry finance specialists have forecast a slowdown in recruitment as employers’ costs rise next month, but suggested most businesses should weather the impact.
Chancellor Rachel Reeves was expected to deliver a gloomy spring financial statement on Wednesday, with cuts to civil service jobs, welfare benefits and departmental spending amid a deteriorating economic outlook, but with no further tax rises.
However, a £25 billion increase in employers’ national insurance contributions (NICs) allied to a lower pay threshold at which NICs must be paid, plus a rise in the National Living Wage and cut in business rates relief, kick in from early April.
Industry accountant Chris Photi of White Hart Associates said: “Businesses are prepared. Certainly, they consider it a challenge. The extra costs are significant, but businesses have had five months to work this out. The biggest impact is going to be on recruitment. People are not going to recruit.”
Alan Bowen, advisor to the Association of Atol Companies, agreed: “It’s going to be an issue for recruitment. People are concerned. I suspect if people leave, they won’t be replaced.”
He noted “concern that costs are kept under control” and said: “There is a general feeling the economy is not going well and that is delaying [customers’] booking decisions.”
A senior industry source described trading as “flat” and said: “It’s starting to hurt. People who have not prepared by cutting costs will be in real trouble.”
Bowen described Tui’s decision not to add capacity this summer as “reasonable”, suggesting current offers of money-off bookings in the school holidays by Tui’s rivals indicate “they still have capacity to sell”.
Tui UK & Ireland managing director Neil Swanson confirmed “a lot of (unsold) capacity in the market” last week and said: “I’m pleased we didn’t increase [capacity]. Jet2 increased and easyJet increased massively. We stayed broadly flat; that feels like the right place to be.”
He added: “I don’t want to get stuck in a really lates market where everybody has a lot of capacity left. Some seat prices at Easter and into early summer are ridiculously low.”