Employers Warn of Job Losses as Budget Sparks Offshoring Fears

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Concerns are mounting among UK businesses following Chancellor Rachel Reeves’s recent Budget, with employers warning of significant job cuts and the relocation of roles overseas to mitigate rising costs. The Budget’s impact, particularly the increased National Insurance contributions, minimum wage hike, and enhanced union and workers’ rights, has left companies grappling with what James Reed, CEO of recruiter Reed, calls a “triple whammy.”  

 

Reed highlighted that businesses are increasingly considering moving jobs to lower-cost countries, such as India, to remain financially viable. “Offshoring is something that people have on their list of possible things to do, and that has just moved up the agenda because the cost of hiring has gone up,” he explained. While not a decision companies take lightly, he said such moves would often happen discreetly, avoiding public or employee scrutiny.  

 

Neil Carberry, CEO of the Recruitment and Employment Confederation, confirmed these concerns, noting that larger firms are actively discussing offshoring as a response to the Budget. These preparations come amid growing fears that the Budget will negatively affect the UK economy. Deutsche Bank has warned the measures could result in 100,000 fewer jobs, both from direct redundancies and uncreated positions.  

 

The rise in employer National Insurance contributions, set to increase from 13.8% to 15% in April, is one of the most contentious measures. It coincides with a higher-than-expected 6.7% rise in the National Living Wage and additional costs from Labour’s Employment Rights Bill, which government analysis suggests could cost businesses nearly £5 billion annually.  

 

Industries such as logistics, hospitality, retail, and small manufacturing are expected to feel the brunt of these changes. According to Carberry, many companies are already exploring strategies to offset the increased costs, including automation, offshoring, smaller pay rises for non-minimum-wage workers, and higher consumer prices.  

 

Reed cited an example of a white-collar recruiter planning to move 27 UK jobs to India due to the National Insurance increase. He warned this could become a widespread trend, particularly in professional services like accounting, finance, HR, and recruitment, where graduate-level roles are often involved. "With everything connected digitally now, for services businesses, you can move jobs almost as fast as you can move money,” he said.  

 

Youth unemployment, already on the rise, could worsen as offshoring affects graduate opportunities. The joblessness rate for 16 to 24-year-olds has climbed from 12.1% last year to 14.8% today, exacerbating concerns about young people entering the workforce. “Graduate jobs have been hit hard over the last few months, so I’m worried about the opportunities available to young people,” Reed added.  

 

While Reed’s company, a family-owned UK business, has committed to retaining jobs domestically, he acknowledged the financial strain. “We’re very committed to the UK... but it is going to make it harder to make a return and invest more in the business because it’s an immediate hit to our bottom line,” he said.  

 

The government has defended the Budget, citing the need to address a £22 billion fiscal deficit inherited from the previous administration. A spokesperson stated, “More than half of employers will either see a cut or no change in their National Insurance bills. This government is committed to delivering economic growth by boosting investment and rebuilding Britain.”  

 

As businesses adjust to the new measures, the potential for large-scale job losses and offshoring remains a pressing concern, casting doubt on the Budget’s promise of economic stability and growth.

 

Based on a report by Daily Telegraph 2024-11-20