UK firms from the retail, leisure, hospitality, manufacturing, logistics and housebuilding sectors have said they will incur additional costs due to the increases in the national living wage and employers’ national insurance contributions announced in the Budget on 30 October. According to Reuters the total declared impact is now £1.1 billion.

Some of the sectors most affected include retail (the largest employer in the private sector with 4.9 million employees as of 2023), leisure and hospitality because of the volume of staff they employ operating on relatively low wages.

The changes could put additional pressure on already strained businesses and raise the stakes as the crucial festive trading period gets into full swing.

Popular pizza chain Domino’s Pizza (DOM) said on 9 December it will take a £3 million ongoing annual hit from the changes.

Supermarket group Sainsbury’s (SBRY), which employs around 150,000 people, said it was possibly facing ‘headwinds’ of £140 million.

Pub group JD Wetherspoon (JDW), which employs more than 40,000 people, said its annual costs would increase by an estimated £60 million in 2025.

Another pub group, Marston’s (MARS), which operates 1,339 pubs in the UK with about 11,000 employees, said it expects a £4 million impact due to wage inflation and another £4.6 million from additional employment costs in fiscal 2025.

Also heavily impacted is Royal Mail owner International Distribution Services (IDS) which employs nearly 130,000 people in the UK. The firm said national insurance changes will cost them around £120 million a year.

The latest figures on recruitment suggest the Budget is having a knock-on effect on hiring decisions.

Data produced by S&P Global on behalf of KPMG and the REC (Recruitment & Employment Confederation) shows employers are becoming increasingly reluctant to hire full-time staff.

During November demand for staff hit the lowest level since August 2020 amid moderating growth in permanent salaries.

Jon Holt, group chief executive and UK senior partner KPMG, says: ‘Businesses are having to weigh up the prospect of increasing employee costs following the Budget, which has led to an accelerated slowdown in hiring activity across the board.

‘While the data was already heading in that direction, permanent placements saw their steepest reductions in over a year last month, and temporary roles also saw a fifth consecutive decline.’

Easing wage inflation may be welcomed by the Bank of England as it weighs its latest decision on interest rates next week.

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