Worry: Labour’s Budget tax raid will reshape the UK manufacturing landscape (Image: PP Control & Automation)
Labour’s tax-grab with stunt the growth of lifeblood industries as firms grapple with sky-high operational expenses and widespread skills shortages, bosses warn.
The fallout from October’s Budget, coupled with mounting economic gloom, is set to collide in the coming months with the tipping point in April.
Then companies will have to cough up massive National Insurance rises – the grim reality of Labour’s first Budget in 14-years.
Employers will pay 15 per cent on salaries above £5,000, compared with 13.8 per cent on those above £9,100 now. In addition, the National Living Wage will increase to £12.21 an hour, while the National Minimum Wage, for those aged 18-20, will rise to £10 an hour from the spring.
It is feared the move will force thousands of businesses, from struggling post offices, manufacturers and independent providers in the social care sector, to the wall.
Steve Morley, President of the Confederation of British Metalforming, said: “Former Labour Prime Minister Harold Wilson famously coined the phrase ‘a week is a long time in politics’. Well I think we can now say that a day is a long time in politics.
“All of the optimism following the election, and the promise of an Industrial Strategy, has been wiped away with the ill-thought-out Budget.
“The tax hikes forced on businesses could have a devastating impact on [small and medium-sized enterprises], who are still grappling with the impact of inflation and energy prices far higher than their European counterparts.
“This additional burden – estimated to cost our members tens of millions of pounds – is another whammy to an already under siege sector.”
Optimism has been eroded by Labour’s ill-thought Budget (Image: Confederation of British Metalforming)
More than half of business financial chiefs surveyed by analysts Deloitte said slashing costs was a priority following Rachel Reeves’s financial statement in October.
The poll showed hiring intentions in the final three months of last year fell at the fastest pace since early 2020, while a net 58 per cent of firms expect to cut discretionary spending.
Tony Hague, boss of PP Control & Automation, one of the world’s leading strategic manufacturing outsourcing specialists, predicted the tax raid would reshape UK manufacturing.
In a dire warning of what could lie ahead he said a £25 billion annual rise in employers’ NI contributions would see firms grapple with high operational expenses and widespread skills shortages.
And in a glimpse of the dystopian future unfolding, he said: “Automating repetitive, high-labour tasks can lead to substantial savings, including NICs, wages, and training investments, while also freeing up team members to take on higher value tasks.
“Machines also offer consistent performance with minimal error, contributing to higher product quality and fewer costs associated with rework or quality control. You can also easily manage fluctuations in demand, whether that is scaling up or scaling down.”
The company, operating from the West Midlands, the industrial heartbeat of Britain, is a leading manufacturing specialist building machines that robotically milk cows, provide packaging solutions, and cut parts used in F1 cars and airlines.
It has been deluged with inquiries from companies operating in the clean energy, agritech, and warehouse automation wanting to learn how to cut fixed costs.
Employers will pay 15% on salaries above £5,000 compared with 13.8% on those above £9,100 now (Image: PP Control & Automation)
Mr Hague said: “Rather than investing in an in-house team for every phase of production, manufacturers might contract with outsourcing partners for supply chain management, engineering and production requirements.
“The strategic shifts I believe will now play out will enable manufacturers to transform traditionally rigid cost structures into agile frameworks, allowing them to respond effectively to both current challenges and future demands.
“She probably didn’t realise it at the time, but the Chancellor’s employment tax rises could well have given the UK the biggest push towards automation and outsourcing we’ve seen in decades.”
Government borrowing costs have hit their highest level in 16 years and the pound has slumped to a 14-month low against the dollar.
An economic outlook is set to be published on March 26 when the Office for Budget Responsibility will deliver its fiscal forecast.
Ben Zaranko, Associate Director at the Institute for Fiscal Studies, said: “As it stands, the Chancellor could face a rather unenviable set of options. This unfortunate predicament is largely the consequence of a difficult fiscal inheritance and global economic factors. But it also reflects a series of government choices and mutually incompatible promises: to stick to a hard, numerical fiscal rule while leaving only the finest of margins against it; to prioritise public services and avoid imposing another round of austerity; not to raise the biggest taxes, and not to raise taxes again after the Autumn Budget; and to hold only one fiscal event per year. If higher wipe out her so-called ’headroom’, something will have to give.”
On entering Downing Street PM Sir said Britain was experiencing the “sunlight of hope” promising “national renewal and a return of politics to public service”.
But writing for the Express yesterday former Home Secretary said: “The first six months of this Labour government have been a disaster. People are suffering, businesses struggling [and] our international reputation is being damaged.”