Employers are preparing to move tens of thousands of British jobs offshore in response to Chancellor Rachel Reeves’ latest Budget, top recruitment experts have warned.
James Reid, CEO of recruitment giant Reid, has revealed that companies are exploring shifting roles to low-cost countries such as India to offset rising expenses resulting from the “triple whammy” of higher employer National Insurance contributions, a higher National Living Wage and the introduction of stronger union and workers rights. Government analysis suggests these new workers rights could cost companies nearly £5 billion a year.
Neil Carbery, chief executive of the Recruitment and Employment Confederation, echoed these concerns, noting that he was in discussions with business leaders considering offshoring following the Budget announcements. “I have spoken to several major companies where the question was about offshoring,” he said.
These developments have intensified concerns about the budget’s potential impact on the UK economy. Despite the Chancellor’s focus on growth, business leaders and economists warn that these measures could hamper investment, job creation and wage growth as inflation worsens.
Deutsche Bank issued a note to City clients warning that the budget could result in the loss of 100,000 jobs, either through redundancies or not creating jobs that would otherwise have been created.
Reed noted that offshoring has become a more attractive option for companies facing rising costs. “It’s something people put on their list of things to do, and that has moved up the agenda because of the high cost of staffing,” he explained. He added that although companies may not publicly announce such moves, they “will happen quietly, surreptitiously.”
He cited the example of a white-collar recruiter planning to shift 27 UK jobs to India due to increased National Insurance burden. “It will definitely be thousands (of jobs). “I think it could be in the tens of thousands because there are a lot of business services that have that as an option.”
Sectors most likely to be affected include professional services such as accounting and finance, recruitment and human resources. “With everything digitally connected now, for service companies, you can move jobs almost as quickly as you move money,” he said.
The National Insurance increase, which is due to come into force from April, will raise the rate from 13.8% to 15% and lower the salary threshold at which employers start paying the tax. The 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 the most affected by these tax changes. “In these sectors, automation, offshoring where possible, lower wage increases for those not earning the national minimum wage, and higher prices will be used (to offset the impact),” Carberry commented.
The trend of offshoring raises concerns about rising youth unemployment rates, which rose from 12.1% last year to 14.8% among people aged 16-24. Reid expressed concern about diminishing opportunities for young people entering the workforce.
Despite facing mounting multi-million pound costs for his company, Reid declared his commitment to keeping jobs in the UK. “We are very committed to the UK; We are a family business in the UK. I don’t want to work abroad; “I want the jobs to be here,” he stressed.
A government spokesman defended the budget measures, saying: “With the collapse of our public services and a £22bn financial black hole inherited from the previous government, we have had to make difficult choices to repair the foundations of the country and restore much-needed economic stability.” Allowing businesses to flourish. In doing so, more than half of employers will see a reduction or no change in their National Insurance bills. There will be an extra £22.6 billion for the NHS, and workers’ payrolls will be protected from higher taxes. “This government is committed to achieving economic growth by boosting investment and rebuilding Britain.”