Autumn Budget 2024: Extra employment costs create urgent need for broader plan for UK growth, says CIPD

The CIPD has responded to the UK Chancellor's Budget, which will provide welcome support for some working people and public services.

However, increased business costs announced in the Budget, alongside the planned changes to employment regulation, are bound to impact growth. There are risks that together these measures could disrupt many employers’ recruitment and skills investment plans.

It’s crucial the UK Government sets out its plan to work with business to support growth across the economy. The upcoming Spending Review and Industrial Strategy need to set out how the government will work with employers to raise productivity in ‘everyday economy’ sectors and not just in a limited number of ‘high-growth sectors’.

Increasing productivity will require changes to key areas of policy such as skills, innovation and business support to boost business investment in people management and technology adoption. 

Increases to National Minimum Wage and employer National Insurance contributions

This rise in the National Minimum Wage will be welcomed by many employees and will bring more people into pension savings and boost the amounts being saved.  

However, many businesses may struggle to absorb the increase and could end up passing this on through higher prices, accepting lower profits or cutting headcount. 

Previously, significant increases to the National Minimum Wage haven’t led to businesses becoming more productive. Improving productivity in low-wage sectors will need to be a priority for the government’s new Industrial Strategy, alongside its focus on a limited number of high-growth potential industries. 

The increase in employer National Insurance contributions (NICs) will have a negative impact on business investment, for example on wages and jobs for many employers and could cause profits to fall. It’s likely many firms will absorb this rise through raising prices, which could also have inflationary impacts, but the proposal to exempt many small firms from the increase is welcome. 

There needs to be a focus on ‘everyday economy’ sectors to boost productivity 

It’s essential that the Chancellor’s ambition to boost economic growth also targets the ‘everyday economy’ sectors that employ millions of workers, not just those involved in innovation and research and development. This will help to raise productivity and support employers to manage the cost of NICs rises and other measures introduced in the Budget. 

The Get Britain Working plan is a positive step to tackle inactivity

The CIPD welcomes the Get Britain Working initiative to bring together national and local efforts to boost the number of people in work and join up services to support employment, health and skills development. Ensuring people have access to jobs that give them flexibility to help manage health conditions and provide training and development opportunities will be key.  

We’d also like to see a focus from the government on improving access to occupational health services for those in work. This will ensure that health conditions can be addressed and early on, so fewer people fall out of work due to a disability or long-term health conditions.