A fall in UK gross domestic product (GDP) has prompted calls for the government to reverse its hike in employer national insurance contributions (NICs), unveiled in October’s budget.
Data from the Office for National Statistics (ONS) revealed monthly real GDP fell by 0.1 percent in October 2024. It follows a similar fall of 0.1 percent in September 2024.
Over the three months to October 2024, real GDP grew by 0.1 percent from the three months to July 2024, with growth in the services and construction sectors in this period.
However, commenting on the drop in monthly GDP, Daisy Cooper, treasury spokesperson for the Liberal Democrats, said: “This unexpected fall in GDP shows why it’s so disappointing that the budget missed so many opportunities and made so many self-defeating decisions.
“Small businesses are the engine of our economy and drive growth. Yet this government has decided to burden them with more costs.
“If the government wants to turn these figures around then they should realise their mistake and reverse their NICs hike on small business.”
David Bharier, head of research at the British Chambers of Commerce (BCC), said: “With growth of just 0.1 percent in the three months to October and an unexpected fall in the monthly GDP, the UK economy was already fragile ahead of recent policy announcements.
“The full impact of the budget since then is yet to be seen. However, our research has already shown a spike in anxiety over tax and employment policy. Many businesses are telling us that increased costs are likely to have an impact on their investment and recruitment plans. Firms of all shapes and sizes are facing tough decisions in early 2025.”
He said that BCC’s recent economic forecast shows growth of just 0.8 percent for the whole of 2024.
“The NICs increase and employment law changes could slow recruitment intentions and household spending.”
But he added: “The industrial strategy due in the spring has the potential to boost business growth for the long-term. Companies are also eager to see government plans on business rates reform, trade and infrastructure.
“Getting sustained economic growth will only be possible if the environment is right for businesses to invest, recruit and export.”
Ben Jones, lead economist at CBI also called the figures “disappointing”, but was more optimistic about employers’ ability to manage the NICs hike.
“It may take a few more months for firms to work through the impact of the sharp increase in employment taxes outlined in the budget and adjust their hiring and investment plans accordingly. But businesses can probably still look forward to a steady, if unspectacular, economic recovery next year as the impact of the inflation shock fades and interest rates come down further.
“The government can support business confidence by accelerating measures that could restore some headroom for investment. These include delivering flexibility to the Apprenticeship Levy, preparing a faster timetable to reform business rates and working in full partnership with boardrooms to develop a long-term modern industrial strategy that can provide the stability and certainty needed to unlock innovation, investment and grow the economy.”
However, a report on UK employers hiring plans from ManpowerGroup found that recruitment has stalled going into the New Year, with stagnant hiring plans reported for January to March 2025.
The ManpowerGroup Employment Outlook Survey found that the UK Net Employment Outlook – a measure of business hiring confidence – remains at +28 percent.
The report said that more than a third of businesses had an appetite to hire for growth – a figure that remained consistent across 2024. But this growth mindset among employers has “failed to translate into action”, the report said, as the Labour government has not yet provided the reassurance businesses need to plan new appointments.
Michael Stull, managing director of ManpowerGroup UK, said: “Businesses have been paralysed by the recent budget announcement, just as they were post-COVID.
”There is a strong appetite to grow, but the new government’s actions have thrown the labour market into yet another period of uncertainty.
“Businesses have been waiting to see signs of the economy kicking into gear, but the government has yet to give businesses the confidence to go ahead with growth plans.”
