Recent economic data reveals stalled growth, climbing national debt, and waning business confidence in the UK. Companies face closures, job losses mount, and benefit claims surge amid these challenges.
Impact of Employer National Insurance Increase
Chancellor Rachel Reeves introduced a £26 billion rise in employer National Insurance contributions. This measure has compressed business profits, reduced hiring activity, and affected employment levels.
Unemployment has increased from 4.1% to 5.2%, with projections indicating further rises.
Employment Rights Bill Comes into Force
On February 18, initial provisions of Deputy Prime Minister Angela Rayner’s Employment Rights Bill take effect. Designed to enhance worker protections, the legislation introduces additional regulations estimated to impose £5 billion in costs on employers. Businesses anticipate heightened union activity and a rise in employment tribunal cases, particularly as many firms navigate financial pressures.
Youth Unemployment Hits Decade-High
Youth unemployment stands at 16.1%, the highest in more than a decade and exceeding rates in several European countries. This occurs as artificial intelligence accelerates automation, eliminating entry-level positions. Notably, over 40% of 18-24-year-olds supported Keir Starmer in the recent election, compared to just 5% for the Conservatives. Early career setbacks in this age group can have lifelong repercussions.
Public Sector Expansion Contrasts Private Sector Strains
The public sector has added nearly 90,000 jobs under the current government. Public sector pay rose 7.4% in the three months to December, outpacing the private sector’s 3.2% increase. Funded by increased borrowing, this growth contrasts with private sector dynamics, where productivity has risen by a third since 2000, while public sector output per worker remains stagnant.
Welfare Claims on the Rise
Sickness benefit recipients have grown from 3.5 million to 4.2 million, with 8.4 million people now receiving some form of welfare support. These trends place additional demands on tax revenues primarily generated by the private sector.
