Credit: Hccougar/Wikimedia

Rising costs could kill off jobs, warns CBI

The group said some companies would struggle to cope with the living wage, apprenticeship levy and rates.

by Jack Torrance
Last Updated: 26 Jan 2016

On the face of things, Britain’s labour market looks pretty healthy. The country has a higher employment rate than the US, Ireland or France and is catching up with Germany. And more than two fifths of businesses are looking to expand their workforce next year, according to a survey of the CBI’s members, published today.

But the business group says there is a risk that the powers that be are getting complacent. Since its surprise triumph in May’s election, the government has announced plans for a £7.20 'national living wage' for the over-25s and an ‘apprenticeship levy’ charge on the payrolls of larger companies. It has also failed to reform the hated business rates system. Business costs are piling up and the CBI says that could threaten jobs growth.

Just one in six of the 342 businesses it surveyed (a small sample size, admittedly) said they supported the levy, and 47% said it would be costly and bureaucratic. The survey was conducted between August and November, so businesses were already concerned about the prospect even before the government announced the finer details of the scheme last month. A tax on jobs is perhaps not the best way to boost the number of skilled people in work. 

Though just 40% of respondents expected to be affected by the new national living wage, it will likely have a harsher impact on some businesses than others. Half of those in the service sector said they would have to put prices up to cope with the costs, 27% will employ fewer people and 18% will ‘make changes to’ (read: ‘cut’) pay and perks.

‘There’s a danger of Government complacency, with companies facing multiple increasing costs, through the apprenticeship levy, the national living wage and unreformed business rates, these are acting as a cumulative drag that could hamper growth,’ said the group’s new(ish) director-general, Carolyn Fairbairn. ‘The Government must be careful not to sacrifice prosperity for political expediency by saddling businesses with costs that could harm investment, which is critical to increasing productivity.’

Of course there’s a modicum of self-interest at work here – higher costs damage profits and therefore executive bonuses, as well as threatening jobs. But the government certainly needs to balance efforts to boost workers’ prospects with the financial health of UK plc.

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