Business leaders in the UK are increasingly showing their unhappiness with the Budget a few weeks ago, where £25B of the £40B potential additional tax raise comes from employers. The top four sources of tax income come from employment and employers (income tax, National Insurance, VAT, and corporation tax). Logic might tell you to leverage this by helping business to be more successful – by helping with much needed investment for growth, by reducing red tape, by helping with required skills, and more – so employers would naturally and sustainably generate more tax £s. Take the same slice from a bigger pie.
If you raise employment costs for businesses, then we are very likely to see reduced employment and therefore reduced tax revenue. Indeed, the rate of unemployment has just risen to a larger-than-expected 4.3%, up from 4.0% per cent in the previous three months. In the three months to the end of October, the estimated number of vacancies fell by 35,000 on the quarter to 831,000, the 28th consecutive fall. These trends are likely to persist. Many employers are also going to struggle to give pay rises, as their wage budgets are eaten away by, for example, a £600 per employee NI increase just as a starting point. And many businesses will decide the way to cope with increased costs is to raise prices, adding to inflationary pressures. So much for the claim that Budget won’t negatively affect working people.
For the manufacturing and technology companies who are our customers, there are other options to cope. Productivity. This may be the time to make more investment in technology to make your business more efficient. According to the International Federation of Robotics, the UK is not even in the top 20 of developed nations in terms of the ratio of robots to factory workers. Although I am not necessarily talking about minimising direct labour costs (although for some this will be an inevitable outcome), I am talking about getting the most from your people.
I am optimistic about the creativity, tenacity and perspicacity of UK manufacturers – I think that’s why you are still in business after a tough and exhausting period of lockdowns, sky-high energy prices and interest rates, and supply chain interruptions. And constant technology and market transformations; AI being just one high profile example.
This Budget is yet another hurdle for you. If you can get over it, it is because you have developed a better, more efficient operation.
Talk to us to see how we can help you with your productivity.
