Employers are preparing to move tens of thousands of British jobs abroad in response to Chancellor Rachel Reeves’ recent Budget, leading recruitment experts have warned.
James Reed, CEO of recruitment giant Reed, revealed that companies are exploring a shift in roles to cheaper countries such as India to offset higher costs resulting from the “triple whammy” of higher employer national insurance contributions, a rise in the national living wage . and the introduction of stronger trade union and employee rights. Government analysis shows that these new employee rights could cost companies almost £5 billion a year.
Neil Carberry, chief executive of the Recruitment and Employment Confederation, echoed these concerns, saying he has been in discussions with business leaders about offshoring jobs following the Budget announcements. “I’ve talked to a lot of larger companies where the question was about offshoring,” he said.
These developments have heightened concerns about the budget’s potential impact on the UK economy. Despite the chancellor’s emphasis on growth, business leaders and economists warn the measures could hamper investment, job creation and wage growth while worsening inflation.
Deutsche Bank sent a note to City customers warning that the budget could result in the loss of 100,000 jobs, both through layoffs and jobs not created that might otherwise have been created.
Mr. Reed notes 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’s just moved up the agenda as the cost of hiring has gone up,” he explained. He added that companies may not announce such moves publicly, but they will “just happen quietly.”
He cited an example of a white-collar recruiter who planned to move 27 British jobs to India because of increased National Insurance charges. “There will certainly be thousands [of jobs]. I think it could be tens of thousands because there are a lot of business service providers that have that as an option,” Mr. Reed estimates.
Sectors most likely to be affected include professional services such as accounting, finance, recruitment and human resources. “Now that everything is digitally connected, for service companies you can move jobs almost as quickly as you can move money,” he says.
The National Insurance increase, which comes into effect from April, will increase 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% increase in the national living wage and additional costs resulting 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: “These sectors will see automation, offshoring where possible, lower pay increases for those not covered by the national minimum wage, and higher prices. [to offset the impact].”
The offshoring trend is raising concerns about rising youth unemployment, which has risen from 12.1% last year to 14.8% among 16 to 24-year-olds. Mr Reed expressed concern about the declining opportunities for young people to enter the labor market.
Despite facing increased costs estimated at millions of pounds for his own business, Mr Reed declared his determination to keep jobs in Britain. “We are very committed to Britain; we are a British 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, saying: “With our public services crumbling and a £22 billion fiscal black hole inherited from the previous government, we have had to make tough choices to rebuild the country’s foundations and restore much-needed economic stability . let businesses flourish. By doing this, more than half of employers will see a reduction or no change in their national insurance bills. There will be £22.6 billion more available for the NHS, and workers’ paychecks will be protected from higher taxes. This government is determined to deliver economic growth by boosting investment and rebuilding Britain.”