As April 2025 approaches, UK businesses are preparing for a financial storm that threatens to reshape the economic landscape. While the current environment feels challenging, the pressures building beneath the surface suggest that the second quarter of next year could bring even greater difficulties. Rising taxes, slowing economic growth, and increased employment costs are creating a toxic mix, with job losses expected to ripple across industries from retail to larger organisations.
Tax Increases Tighten the Noose
At the heart of the impending crisis are significant tax rises announced in the October 2024 Budget. Among the most impactful is the increase in employers’ National Insurance Contributions (NICs), which will rise to 15% on salaries above £5,000, effective April 2025. This change, designed to bolster public finances, will significantly raise payroll costs for businesses, particularly those with sizeable workforces.
Adding to the burden is the National Living Wage increase of 6.7%, pushing the hourly rate to £12.21. While this aims to support workers amid high living costs, it places additional strain on employers already grappling with rising overheads.
A Faltering Economy
These tax measures come as the broader UK economy struggles to find its footing. Official figures indicate a contraction of 0.1% in GDP in October 2024, marking a troubling slowdown after months of stagnation. Projections for 2025 suggest limited growth, with GDP expected to rise by just 1.2%, well below pre-pandemic averages.
Businesses across sectors are reporting weakening demand, with consumers tightening their belts in response to persistent inflation and reduced discretionary income. The S&P Global Flash Composite Purchasing Managers’ Index has highlighted shrinking activity in both the manufacturing and services sectors, suggesting that economic momentum is slipping away.
A new round of Presidential policies arising from the USA have also brought significant concerns regarding export tariffs to the UK economy, another potential hit to struggling businesses in the coming year.
Employment Under Pressure
Rising costs and weakening demand are already taking a toll on employment. Recent data reveals that UK firms are reducing staffing at the fastest rate since 2021. Employers, faced with higher NICs and wage costs, are freezing recruitment and opting not to replace departing staff. In many cases, reductions in hours and redundancies are becoming unavoidable.
The retail sector is particularly vulnerable. Already battered by shifting consumer habits and rising rents, many retailers now face the prospect of further job cuts to remain solvent. Larger organisations are not immune, with several sectors, including construction and financial services, reportedly reviewing headcounts ahead of April’s changes.
Navigating the Storm
While the challenges ahead may seem daunting, there are steps businesses can take to safeguard their operations. The key lies in adapting to the new reality with agility and foresight. This begins with a comprehensive review of financial and operational strategies to identify areas where efficiencies can be gained and costs managed more effectively.
A Practical Solution for Businesses
For businesses seeking to weather the storm, GBMM offers a Company Health Review, designed to ensure your organisation is operating at peak efficiency. This review evaluates key areas such as employment costs, operational practices, finance function and finance costs and procurement, identifying opportunities to optimise performance and reduce unnecessary expenditure.
GBMM’s experts can help your business take advantage of best practices, ensuring you are well-positioned to navigate the challenges ahead. From streamlining financial processes to exploring strategic funding options, our tailored approach provides the tools and insights you need to remain resilient in the face of uncertainty.
Take Control Before April 2025
The pressures facing UK businesses may intensify in the months ahead, but proactive planning can make all the difference. By acting now, you can ensure your business is not only prepared but positioned to thrive despite the headwinds.
To arrange your Company Health Review, contact GBMM today. Our expert team is here to help you weather the financial storm and secure your business’s future.
