London businesses are reluctant to take on new hires ahead of the Budget out of fears that taxes will be raised, a new survey shows.
The research, conducted by KPMG, the Recruitment and Employment Confederation (REC) and BusinessLDN, suggests that businesses are taking a cautious approach to hiring until there’s more clarity over the direction of policy.
The London permanent placement index, which measures how fast businesses are taking on new staff, fell to 43.7 in September compared to a nationwide average of 44.9.
Anything below 50 indicates contraction, suggesting that businesses in London are slowing the pace of new hires much faster than elsewhere in the country.
The number of vacancies was also falling more sharply than elsewhere in the country, with the index at 47.3 compared to a national average of 47.6.
At the same time, the survey suggested that more and more people were out of work in London.
Muniya Barua, deputy chief executive at BusinessLDN, said that the “frenzy of Budget speculation” was weighing on employers’ hiring intentions.
“With the number of people out of work in the capital at its highest level in almost three years, the Chancellor needs to do more to get private investment motoring and to get more Londoners into jobs,” Barua said.
Chancellor Rachel Reeves will reportedly raise taxes by around £35bn in the Budget, with a hike to employers’ national insurance set to be at the centre of her revenue raising package.
Business groups have warned that the tax hike will likely hit hiring and reduce the pace of wage growth, ultimately impacting employees in the long run.
“An employer hike in National Insurance will do little to encourage firms to take on new staff,” Barua said.
The tax hikes will come shortly after the government confirmed details of its new employment laws.
Its own analysis suggests that firms’ cost burden will rise by around £5bn annually as a result of the measures.