A recent Bank of England survey has painted a worrying picture for UK employers — job cuts are rising at the fastest pace in four years, as higher taxes and ongoing cost pressures continue to bite.

The Decision Maker Panel, which surveys more than 2,000 chief financial officers each month, found that employment fell by 0.5% in the three months to August, the sharpest drop since 2021. Plans for future hiring also weakened, with growth expectations slipping from 0.5% to just 0.2%.

The impact of higher National Insurance

Many businesses pointed to April’s £25 billion rise in employer National Insurance contributions (NICs) as the key factor behind their decisions to cut jobs or reduce wage growth.

• Almost half of the businesses surveyed said the NIC increase directly led to staff reductions.
• Around one in three raised prices to offset the additional costs.
• Two-thirds reported tighter profit margins, and one in five said they paid lower wages than planned.

While the overall impact wasn’t as severe as some had feared, the pressure is clear: rising employment costs are forcing difficult decisions across sectors.

What this means for business owners

For small and medium-sized businesses, this is another reminder of how quickly tax and policy changes can affect hiring, pay and planning. Higher NICs don’t just impact payroll — they ripple through to pricing, profitability and competitiveness.

The Bank of England will take this softer jobs data into account when it next meets to set interest rates on 18 September, though most analysts expect rates to stay at 4% for now.

Looking ahead to the November Budget

With Chancellor Rachel Reeves due to deliver the Autumn Budget on 26 November, many business owners are watching closely for signs of further tax changes or measures to ease growth pressures. The Treasury has said the upcoming Budget will “focus on pro-growth reforms,” but speculation about new taxes or adjustments to existing reliefs remains high.

My take

The takeaway for businesses is simple: plan ahead, stay flexible, and model your costs under different scenarios. Even small changes to employer taxes or thresholds can have a big impact on payroll budgets.

If you’d like a clear view of how potential Budget changes could affect your business — or a review of your current cost structure — get in touch.

I’ll also be sharing updates and insights in the run-up to the November Budget, so you can stay informed and prepared for whatever comes next.