Next, the renowned UK retailer, is bracing for a challenging holiday season as it offers staff extra hours in preparation for Christmas. However, looming tax changes announced in the government's recent Budget have cast a shadow over the retail sector's hiring prospects. From April, the rate of National Insurance (NI) paid by employers will increase, while the threshold for employer contributions will drop significantly from £9,100 to £5,000. This has raised concerns among business leaders, including Next's CEO, Lord Wolfson, who warns that these measures will make it increasingly difficult for individuals to enter the workforce.
"My worry is that it's going to be harder and harder for people to enter the workforce," – Lord Wolfson
Retailers across the UK are voicing their apprehensions about the upcoming tax changes. Next, along with other major retailers like Tesco and Sainsbury's, which have reported significant profits in recent years, signed a letter to Chancellor Rachel Reeves urging a reconsideration of the proposed Budget measures. These companies fear that the increased financial burden on businesses will inevitably lead to a reduction in available job opportunities, particularly for entry-level positions.
"It's very difficult to see how such a big increase in the cost of entry-level work is going to result in anything other than a reduction in the number of opportunities available." – Lord Wolfson
The retail sector, known for its large workforce, is expected to be disproportionately affected by the rise in National Insurance contributions. The National Living Wage is also set to rise at double the rate of inflation in April, adding further pressure on employers. This comes at a time when Next has reported a surge in job applications, with 13 applicants per Christmas vacancy this year—an increase of 50% from last year.
Lord Wolfson expressed his concerns about the rapid implementation of these changes and their potential impact on flexible staffing arrangements during peak periods like Christmas.
"We offer staff extra hours in the run-up to Christmas. If the legislation is going to mean that those hours have to be contractually binding forever then we just won't be able to do it at all, it would be impossible." – Lord Wolfson
The broader economic context adds another layer of complexity. Over the past five years, the government has employed an additional 100,000 civil servants, contributing to a public sector expenditure that accounts for over 40% of GDP. This has sparked debates about efficiency and sustainability.
"Over the last five years the government has employed 100,000 more civil servants." – Lord Wolfson
"We can't go on spending over 40% of GDP on the public sector. It has to become more efficient and if the government can commit to doing that – and deliver it – then I think that will do more for business confidence than anything else." – Lord Wolfson
In response to these concerns, a Treasury spokesperson stated that the Budgetary measures aim to "wipe the slate clean" and stabilize businesses. Meanwhile, the workers' rights bill promises greater protections against unfair dismissals and exploitative zero-hours contracts, though how these reforms will balance against increased employer contributions remains uncertain.
Lord Wolfson acknowledges the necessity for tax increases but criticizes the swift pace and lack of consultation surrounding these changes.
"Government did need to raise taxes. I've got nothing against lowering the threshold for NI in principle but the speed at which it is going to happen, the lack of consultation, that is the problem." – Lord Wolfson