Labour’s punishing tax and National Insurance hikes have driven UK payroll numbers to their lowest level since October 2023, when the country was still clawing its way back from the pandemic.
The figures underline the economic damage caused by Chancellor Rachel Reeves’s decision to load extra costs onto employers already battling tight margins.
The Office for National Statistics (ONS) reports that payroll employment fell by 164,000 in July compared with the same month last year, dropping to 30.3 million. Wage growth also slowed to 4.6 percent from 5 percent, while job vacancies plunged for the 37th consecutive month, down by 44,000 between May and July to just 718,000.
Business owners say Labour’s policies are directly undermining job creation:
“The National Insurance hike tipped the scales, we simply can’t carry full-time headcount when freelance flexibility keeps us afloat,” said Joe Strong, a hospitality sector boss in London and the South-East.
“We’re priced out of investing in junior talent,” warned the director of Marketing agency, pointing to the higher financial risk of training inexperienced staff.
“We’ve been forced to shrink our permanent team just to protect margins,” said the owner of a property services firm, describing the NI increase as the trigger for a major restructure.
“We won’t be taking on any new staff, that’s for sure. we just can’t afford it now. Labour have already been a disaster for the pub trade and hospitality industry. Their policies just don’t make sense,” said a pub landlord in Worcestershire.
Labour claimed the tax raid would help fund public services, but the result has been a crippling squeeze on small and medium-sized enterprises. Higher employer costs per worker, combined with a rising wage floor, are eroding profitability, stifling recruitment, and accelerating the shift to contractors.
For many firms, the economics of taking on permanent staff no longer make sense, leaving long-term investment in the workforce as collateral damage.
