The survey shows 24% of responding businesses said they had increased their staffing numbers over the last three months, down from 27% in Q3. 60% said their workforce had remained constant and 16% reported a cut in staff.

The research was conducted after the Budget when the national insurance changes were announced, with the fieldwork carried out between 11th November and 9th December. 4,808 businesses across the UK responded (91% of whom are SMEs – fewer than 250 employees).

The was a slight recovery in the number of firms attempting to recruit – 59% compared with 56% in Q3. For the firms who have attempted to hire over the last three months, 79% of respondents said they had experienced difficulties, up from 76% in Q3. That’s the highest level since Q2 2023.

Construction and engineering firms continue to struggle the most finding staff, with 83% reporting recruitment issues. Manufacturers are not far behind with 82% having difficulty, followed by 81% of businesses in the transport and logistics sector. At the other end of the scale, 69% of marketing and communications firms faced problems.

Labour costs continue to be the main pressure businesses are facing to raise prices in Q4, cited by 75% of firms. That’s up significantly from 66% in the previous quarter. The pressure is currently felt most keenly in hospitality (87%), then transport (84%), construction (82%) and manufacturing (80%).

More firms are reducing investment in staff, with 19% of responding businesses reporting a cut in training spend compared with 13% in Q3. Meanwhile, 22% said they had increased training investment, down from 25% in the previous quarter. 60% of businesses said training investment had remained the same.

What business say

“We are not going to look to increase our workforce due to the increased employment costs – they are restricting our growth and our ability to support our local community with increasing employment opportunities. The taxes now make wanting to run your own business seem completely not worth it.” 

Small construction firm in the West Midlands

“Like all businesses in our sector, our biggest challenge is going to be addressing the huge additional costs of the NI and NMW increases, which can only be addressed by improving productivity, reducing staff levels, and increasing prices.”

Medium Manufacturing firm in the East of England

“The NI increase is insane, not only does this affect us directly but affects our customers who may now look at not hiring temporary workers to fill gaps. This is a real concern.”  

Small professional services firm in West Midlands

Responding to the findings, Jane Gratton, Deputy Director Public Policy at the British Chambers of Commerce, said:

“Our latest concerning results are likely to represent just the tip of the iceberg.

“Business confidence has been hit hard since the Budget. Employers are now having to plan for a significant increase in employment costs, with steep rises in national insurance and the minimum wage coming down the track in April. This will inevitably impact on recruitment, retention and staff development. Firms tell us they will have to make some tough decisions to balance the books.

“The cuts in training investment are also worrying because improving skills is a vital part of driving economic growth. Our data shows firms are facing significant challenges recruiting the right people. The problems in the construction and manufacturing sectors are particularly concerning.

“Cost pressures are already casting a shadow over recruitment, employment and training efforts. However, the full impact of these challenges will only become apparent later this year.

“If businesses are to grow and meet future demand, they need a functioning labour market. This means addressing skills shortages, removing barriers to workforce participation, and creating the right conditions for firms to invest in their people.”