National insurance increase will add further to inflation as well as threatening jobs

On the day that the former Conservative Cabinet Minister, Rt Hon David Davis MP, stated that April’s planned rise in National Insurance contributions would add to the pressure on household finances, the Institute of Directors has this morning released data showing that the tax rise also presents little option to businesses but to raise prices further. 

When asked how they planned to respond to the rise in employers’ National Insurance contributions, nearly four in ten (38%) business leaders stated that they would “raise prices to offset some or all of the cost”.

There will also be pressure on jobs, with around one in five (19%) saying they would “employ fewer people”. More respondents said they would reduce investment (15%) than said they would increase investment in technology (10%).

Kitty Ussher, Chief Economist at the Institute of Directors, said:  

“The forthcoming rise in employers’ National Insurance contributions is of real and genuine concern to business leaders, particularly those running small and medium sized businesses that are the growth engine of our economy.

“Our data shows that the tax rise is itself inflationary at a time when prices are already rising fast. Faced with the forthcoming increase in the cost of employing their teams, many businesses are planning to raise prices to offset the cost and/or rein in on their hiring plans.”
Full survey results

505 respondents, conducted between 10th-29th November 2021.

The government plans to increase national insurance contributions from 13.8% to 15.05%. Which, if any, of the following statements reflects how your organisation might respond to this change, if at all? Please select all that apply.

We will employ fewer people


We will reduce the wages we pay


We will increase the wages we pay to compensate staff


We will reduce planned investment


We will increase investment in technology


We will raise prices to offset some, or all, of the cost


We will absorb the cost increase


The National Insurance change will make no difference to my organisation


Don’t know


Other (please specify)