“The level of pessimism coming from businesses is a bit overblown, mainly because each individual business finds it much easier to understand the costs of these changes than the impacts on the revenue,” says Narayanan.

“They can quite clearly see the impact of the tax from a cost perspective but they can’t see the boost in demand from additional government spending that was also announced in the budget.

“Even if there are job cuts, I don’t think it’s going to be a big economic problem. I think it’s more of a cyclical effect,” Narayanan added. “A lot of the job cuts are coming from retail and consumer services firms, and they’re quite cyclical businesses anyway. They go through a lot of periods of restructuring.”

Dodgy data

Jobs board Indeed told Big Issue its job postings fell across almost all job categories last year, with overall postings down 14% on pre-pandemic levels.

“Industries likely to be hardest hit by these changes, such as retail and hospitality, are set to see some combination of price increases and cost reduction measures. The likelihood is that many employers will simply either pause hiring and pay rises or, in some cases, may consider laying off staff to cut costs,” Jack Kennedy, a senior economist at Indeed said.

“Industries that benefitted from the highest wage increases towards the end of 2024 – like retail, security, customer service and childcare – can expect to either see this plateau, or for job opportunities to diminish, as employers look for areas to reduce expenditure.”

But the wider picture is that big, national statistics are unreliable. The Office for National Statistics is spending £8m on overhauling the survey used to calculate the national unemployment date, a project which could take until 2027. Forecasting firm Oxford Economics said “valid concerns” over the data make it “virtually unusable”.

IPPR’s Narayanan added: “We’re sort of flying blind in terms of the employment data because of issues around the labour force survey.”

The bet the treasury is making

Much of the malaise facing companies is put down to consumer caution and a lack of money. But Narayanan believes Reeves is making a bet on National Insurance which may pay off down the line.

“The bet you’ve made is that you’ve made it more expensive to hire people, so businesses will be more disciplined about how many people they hire, and instead more incentivised to invest in tools and technology,” says Narayanan. “And actually that’s a really positive thing because the UK has been lacking that kind of investment, and when that happens you get productivity growth. Employees get higher wages, employers get higher profit.”

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