UK employers are bracing for the largest wave of redundancies in a decade, as confidence among businesses plummets amid concerns over rising costs and tax hikes set to take effect from April.
A new survey from the Chartered Institute of Personnel and Development (CIPD) has revealed that redundancy intentions are at their highest level in 10 years, excluding the exceptional period of the Covid-19 pandemic. The findings, based on a poll of 2,000 employers, indicate growing anxiety over increasing National Insurance contributions and the 6.7% rise in the national living wage—both key measures introduced by Chancellor Rachel Reeves in her autumn budget.
The news deals a fresh blow to the Labour government, which has faced mounting criticism over its handling of the economy. Official figures last week showed that Britain narrowly avoided a recession in the second half of 2024, but business leaders warn that rising costs could push the economy back into decline in 2025.
Adding to concerns, inflation is expected to rise to 2.8% in January, up from 2.5% in December, while unemployment is projected to increase to 4.5%, continuing a steady upward trend over the past year.
The Federation of Small Businesses (FSB) has also reported a dramatic collapse in sentiment, with confidence levels among small firms falling from -24.4 to -64.5. The hardest-hit industries include hospitality and retail, with businesses in the accommodation and food services sector reporting the lowest score at -111.0.
Tina McKenzie, policy chair of the FSB, said the upcoming employment rights bill—which is set to enhance worker protections from next year—is adding to business concerns.
“The fourth-quarter blues reported by small firms underline how urgently the government’s growth push is needed. Small firms are understandably nervous about their prospects as 2025 gets under way.”
The CIPD’s chief executive, Peter Cheese, warned that businesses are already making plans to cut jobs, raise prices, and reduce investment in workforce training as they adjust to higher employment costs.
“These are the most significant downward changes in employer sentiment we’ve seen in the last 10 years, outside the pandemic. Businesses have had time to digest these impending changes, with many now planning to reduce headcount,” he said.
The British Beer and Pub Association (BBPA) has also sounded the alarm, reporting that six pubs closed every week in 2024, resulting in 4,500 job losses. The BBPA warned that the October budget will add £650 million in costs to the sector, making it even harder for pubs to stay afloat.
“We’re right behind Labour’s mission to supercharge growth,” said Emma McClarkin, CEO of the BBPA, “but only if it is easier for pubs to keep their doors open.”
With business sentiment at its lowest in a decade, rising taxes, and economic uncertainty on the horizon, 2025 is shaping up to be a challenging year for UK firms. While the government insists that its economic strategy will deliver long-term stability, employers are growing increasingly nervous about higher costs, tighter regulations, and slowing consumer demand.
Unless confidence is restored and businesses feel supported, the UK could be heading for a wave of job losses and economic stagnation, putting further strain on workers, employers, and the government’s growth ambitions.
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UK firms plan biggest layoffs in a decade as business confidence collapses