Businesses prepare to cut staff as they brace for slowdown, CBI finds

The upcoming increase to national insurance contributions has prompted firms to assess their budgets urgently, the CBI found.

Anna Wise
Monday 27 January 2025 06:50 EST
Businesses are bracing for a slowdown, the CBI found (Aaron Chown/PA)
Businesses are bracing for a slowdown, the CBI found (Aaron Chown/PA) (PA Archive)

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A persistent slowdown in activity among private sector firms could weigh on economic growth over the coming months, with businesses set to cut staff and raise prices, according to a survey.

The upcoming increase to national insurance contributions has prompted firms to assess their budgets urgently, the Confederation of British Industry (CBI) said.

Output across the private sector is expected to drop over the next three months, having fallen over the previous three-month period, the survey found.

Activity has been flat or falling since the middle of 2022, reflecting a prolonged period of stagnation.

The CBI, a membership organisation which represents large chains through to small businesses, surveyed 990 firms between December and January.

Anecdotes suggest that companies are being hit by lacklustre demand and caution among consumers, while also continuing to adjust to measures announced in the Budget

Alpesh Paleja, CBI interim deputy chief economist

The survey suggested that sentiment among businesses dipped in the aftermath of the Government’s autumn Budget.

Some respondents highlighted that the tax rises had resulted in them reviewing their budgets at short notice and taking steps to mitigate higher costs.

Plans include raising prices to pass on additional costs to clients, trimming investment plans and cutting staff to reduce business expenses.

The Government has consistently defended the policy measures announced in the autumn Budget, saying they will help it to plug a “black hole” in the country’s finances and invest in different industries to get the economy growing.

The CBI said its surveys indicate that staffing across the private sector will be reduced in the coming months, alongside slowing the pace of new hires or moving jobs overseas.

This reflects weaker sentiment among the group’s members about their ability to grow in the UK, alongside heightened expectations that selling prices will rise over the coming months.

Alpesh Paleja, interim deputy chief economist for the CBI, said: “After a grim lead-up to Christmas, the New Year hasn’t brought any sense of renewal, with businesses still expecting a significant fall in activity.

“Alongside plans to cut staff and raise prices further, this risks an increasingly awkward trade-off for policymakers.

“Anecdotes suggest that companies are being hit by lacklustre demand and caution among consumers, while also continuing to adjust to measures announced in the Budget.

“There is an urgent need to get momentum back into the economy. The Government can help shift the UK’s economic narrative with more determined focus on measures that could drive growth.”

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