Business owners plan further staff cuts following National Insurance hike
More than a third of business owners are planning to make further cuts to staff numbers in response to increased employer National Insurance Contributions (NIC), according to new research for professional services group S&W.
The research, which polled 500 UK business owners with turnovers of £5m upwards, is published on Tuesday 17 June part of S&W’s Business Owners Sentiment Survey (BOSS) report. It found that 20% had already reduced their staff headcount as a direct result of NIC changes announced in the October 2024 Budget – and that an additional 33% are planning to make further cuts.
Combined, it means more than half (53%) of business owners surveyed have or are planning to reduce staff numbers in response to the NIC changes announced by the chancellor. From April 2025, employers faced the rise in employers’ NIC from 13.8% to 15%.
In addition to reducing staff headcount, business have made other changes in direct response to increased NIC:
Have already made the change | Planning change | Total | |
Reducing staff headcount | 20% | 33% | 53% |
Reducing staff hours | 24% | 35% | 59% |
Pay freezes | 22% | 29% | 51% |
Hiring freezes | 21% | 35% | 56% |
Increasing prices | 30% | 46% | 76% |
Scaling back expansion plans | 23% | 39% | 61% |
Increasing use of automation to replace people | 21% | 38% | 59% |
Business challenges
Aside from NIC changes, S&W’s research found significant numbers of owners saying their businesses had been impacted by a range of other external events in the last six months. Rising costs were among the most likely to have hit businesses, whether increased energy and fuel prices (33%) or increases in raw materials and goods prices (31% for both). Among owners with more than 500 employees, 41% said rising staff costs had impacted them.
It is not just costs that have risen in recent months, however. Perhaps unsurprisingly, in a period that covered the start of Donald Trump’s second presidency (as well as ongoing international conflicts), almost as many said they had been impacted by global political uncertainty (31%). Over one in five, meanwhile, said that their business had been affected by reduced customer demand (22%), labour shortages (21%), and cyber attacks or data breaches (21%).
Business Outlook
Businesses see an equally wide array of potential challenges ahead. Similar concerns were raised by owners when asked what three factors had the potential to most negatively impact their business. Over a fifth chose the increase costs of raw materials and goods (24%), labour shortages or skills gaps (24%), increased labour costs (23%) and reduced customer demand (22%).
Strikingly, however, it was increased taxation that was most likely to worry business owners. A quarter (25%) said this had the potential to impact their business most negatively.
Claire Burden, partner in the Consulting team at S&W, commented: “Businesses face considerable challenges in the current economic climate, and many owners are having to make difficult decisions to stay afloat.
“Given that salaries represent a considerable proportion of the overall cost base for most businesses, it is to be expected that many are looking closely at headcounts in response to the increased National Insurance costs.”
Alex Simpson, partner in the Employer Solutions team at S&W,added: “For most businesses, the extent of the employers’ NIC change was a surprise. We anticipated an increase in the employers’ rate, but the additional reduction to the earnings threshold was not expected and is expected to have a dramatic impact over time.
“This should come as no surprise given previous NIC increases prompted warnings from the Office of Budget Responsibility that ‘the economic incidence of the tax is passed through entirely to lower real wages in the medium term.”
The BOSS report will be available for download from 17 Tuesday 2025 at www.swgroup.com.
The research was conducted by Censuswide, among a sample of 500 Business Owners (aged 18+) in the UK – at companies with a turnover of £5m+. The data was collected between 04.04.2025-06.05.2025. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.