Reeves’s National Insurance hike prompts firms to consider moving jobs abroad

Employers are preparing to relocate tens of thousands of British jobs overseas in response to Chancellor Rachel Reeves’s recent Budget, leading recruitment experts have warned.

James Reed, chief executive of recruitment giant Reed, revealed that companies are exploring shifting roles to lower-cost countries like India to offset the increased expenses resulting from the “triple whammy” of higher employer National Insurance contributions, a rise in the National Living Wage, and the introduction of stronger union and workers’ rights. Government analysis suggests these new workers’ rights could cost businesses nearly £5 billion annually.

Neil Carberry, chief executive of the Recruitment and Employment Confederation, echoed these concerns, stating that he has been in discussions with business leaders contemplating offshoring jobs following the Budget announcements. “I have talked to many larger firms where the question has been about offshoring,” he said.

These developments have intensified worries about the Budget’s potential impact on the UK economy. Despite the Chancellor’s emphasis on growth, business leaders and economists caution that the measures could hinder investment, job creation, and wage growth while exacerbating inflation.

Deutsche Bank issued a note to City clients warning that the Budget could result in the loss of 100,000 jobs, both through redundancies and uncreated positions that might have otherwise materialised.

Mr Reed noted that offshoring is becoming a more attractive option for companies facing rising costs. “It’s something that people have on their list of possible things to do, and that has just moved up the agenda because the cost of hiring has gone up,” he explained. He added that while companies may not publicly announce such moves, they “will just quietly happen by stealth.”

He cited an example of a white-collar recruiter planning to move 27 UK jobs to India due to the increased National Insurance burden. “It will certainly be thousands [of jobs]. I think it could be tens of thousands because there are a lot of business services that have that as an option,” Mr Reed estimated.

Sectors most likely to be affected include professional services such as accounting, finance, recruitment, and human resources. “With everything connected digitally now, for services businesses, you can move jobs almost as fast as you can move money,” he said.

The National Insurance increase, set to take effect from April, will raise the rate from 13.8% to 15% and lower the salary threshold at which employers start paying the tax. This change coincides with a higher-than-expected 6.7% rise in the National Living Wage and additional costs from Labour’s Employment Rights Bill.

Industries such as logistics, hospitality, retail, and small manufacturing are expected to be hardest hit by these tax changes. Mr Carberry commented: “In these sectors, automation, offshoring where possible, lower pay rises for those not on the national minimum wage, and higher prices will be used [to offset the impact].”

The offshoring trend raises concerns about rising youth unemployment, which has increased from 12.1% last year to 14.8% among 16 to 24-year-olds. Mr Reed expressed worry about diminishing opportunities for young people entering the workforce.

Despite facing increased costs estimated at millions of pounds for his own company, Mr Reed stated his commitment to keeping jobs in the UK. “We’re very committed to the UK; we’re a UK family business. I don’t want to offshore jobs; I want the jobs to be here,” he affirmed.

A government spokesperson defended the Budget measures, stating: “With our public services crumbling and an inherited £22 billion fiscal black hole from the previous government, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive. By doing this, more than half of employers will either see a cut or no change in their National Insurance bills. There will be £22.6 billion more for the NHS, and workers’ payslips will be protected from higher tax. This government is committed to delivering economic growth by boosting investment and rebuilding Britain.”