A wave of job cuts anticipated after Chancellor of the Exchequer Rachel Reeves announced a tax-raising budget has not yet materialised, as businesses opt to retain staff amid concerns over rehiring difficulties, Bloomberg reported.
The planned £26 billion increase in payroll taxes and a further rise in the minimum wage from April led to warnings from business leaders, including Marks & Spencer group CEO Stuart Machin and billionaire James Dyson. Surveys also indicated potential job reductions, with the closely watched PMI reporting job losses at levels seen during the financial crisis.
However, more than three months after the budget, significant job cuts have yet to be widely reported. The number of UK workers facing redundancy is currently below levels seen a year ago. Businesses remain cautious about letting staff go, recalling challenges in hiring following the pandemic, Bloomberg said.
“We are yet to see a major pick-up in unemployment. This might signal a structural change in the jobs market, due in large part to the fact that it remains difficult and costly to find skills,” said Raoul Ruparel, director at Boston Consulting Group’s Centre for Growth.
In the 14 weeks since the October 30 budget, potential redundancies have remained just under 68,000, 12% lower than the same period last year, according to government filings by businesses. Separate data from HR software provider Employment Hero, covering 90,000 workers at small and medium-sized enterprises, shows that full-time employee numbers rose by 1.4% in January after declines in the previous two months.
Among larger employers, J Sainsbury and Tesco have explicitly cited increased employment costs as a reason for job cuts. The reductions, however, represent a small proportion of the total workforce at the two supermarkets, with around 3,000 and 400 job losses announced, respectively.
Official figures expected on Tuesday are projected to show unemployment rising to 4.5% in the fourth quarter from 4.4%, with a further drop in the number of payrolled employees in January. The Bank of England forecasts a jobless rate of 4.8% by early 2027, which remains low by historical standards. While some uncertainty exists around the data due to reduced response rates, there is little indication of widespread redundancies.
“There’s little sign of an impending spike in redundancies or unemployment,” said Stephen Evans, chief executive of the Learning and Work Institute. “But that doesn’t mean we should be complacent; it’s clear that vacancies are falling and the labour market is relatively flat. We definitely need to keep an eye on data like this as a potential warning sign.”
Redundancy figures primarily capture larger-scale cuts of 20 or more employees, meaning job losses at smaller firms, such as restaurants and pubs, may not be fully reflected. “They don’t always tell us enough of what’s going on, if smaller firms are finding it tougher, or hiring has reduced,” Evans added.
Recent labour shortages across various sectors may be prompting firms to retain staff despite cost pressures. The increase in employer national insurance contributions presents a financial challenge, but businesses may view retaining workers as a more cost-effective strategy than rehiring when demand improves. Private-sector wage inflation remains at 6%, and labour shortages in some industries are expected to persist.
Another factor is how businesses respond to rising costs. Some may attempt to pass on expenses through price increases rather than reducing staff numbers. Employers may also scale back future hiring rather than reducing their current workforce, Bloomberg reported.
