Rachel Reeves’s Budget will hit a delivery industry which is already struggling to meet demand ahead of Christmas, the Government has been warned.
Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), said the Chancellor’s move to push up employer national insurance contributions (NICs) to 15 per cent could see delivery businesses increase fees in the long-term, or leave them unable to deliver on specific dates.
Figures published last week showed temporary seasonal job postings, which tend to focus on meeting Christmas-related demand this time of year, have fallen 23 per cent year on year.
Lower-wage jobs in hospitality and retail jobs are among the hardest hit but deliveries could also be affected.
Firms such as Amazon, Royal Mail, Evri and Yodel have launched major recruitment drives in recent months, while REC’s Labour Market Tracker showed demand for delivery drivers and couriers was up 78.7 per cent last week.
This was followed by postal workers, mail sorters, messengers and couriers, up 53.2 per cent.
The REC tracker helps recruiters and businesses see how the jobs market is evolving. It aims to help spot signs of growth through job vacancy data.
Despite these recruitment drives, Mr Carberry warned that some delivery firms would have to cut services, and might even be unable to deliver on specific dates.
He told i: “We’re also hearing anecdotal reports [of firms saying] ‘we’re actually not going to deliver [on] that date, because we can’t staff that date’.
“We’re just beginning to see it, it isn’t as serious as we see in other sectors, but it’s definitely beginning to emerge.”
Mr Carberry added that in the longer term, customers might find that deliveries get more expensive than they have been in recent years.
“I think consumers have already seen many of the impacts of rising employment costs, if you think about things like the increase in automation in restaurants, fewer service staff covering more tables for instance, the cost of things like delivery going up,” he added.
“It used to be you’d get everything delivered for free, now there’s some rules around that, all these changes will do is cause that to move even further on.
“You’ll still get lots of free delivery in Christmas 2024, by the time we get to Christmas 2025 you have to spend to get things delivered for free might be a bit higher.
“Certainly that will be all about making sure firms can meet demand, with labour where they need labour that will cost more.”
Mr Carberry added, however, that delivery services are not likely to be hit as hard as retail or hospitality.
“The superflexibilty of scheduling for delivery drivers means it’s perhaps not been as hard hit as say hospitality or retail by staff shortages and increasing costs,” he told i.
National insurance payments will increase by 1.2 percentage points for employers, from 13.8 per cent to 15 per cent. The secondary earnings threshold – the level at which employers start making NICs – will be reduced from £9,100 to £5,000.
In another joint letter organised by UK Hospitality earlier this month, bosses said some minimum wage jobs would become “unviable” as a result.
What do recruiters think of NI rise?
Petra Tagg, director at Manpower UK, said the Chancellor’s decision to raise employer national insurance contributions (NICs) has “put already cost-conscious businesses on the back foot as they look at their long-term plans”.
Ms Tagg said “many” businesses are not yet sure of the best solution to cover the costs they face – and are putting a pin in new hires as a result.
“Our analysis shows the increase in NICs could cost employers as much as 33 per cent more for each lower wage worker – they need to make up that difference somewhere,” she told i.
“While employers weigh up that dilemma, we’re seeing them hold fire on permanent hiring decisions, which has led to an uptick in temporary staffing demand as a stopgap.”
Jack Kennedy, senior economist at Indeed, said hiring demand had been “subdued” lately, with job postings 14 per cent below pre-pandemic levels and gradually falling over the past two years.
He said it was “potentially too early to say” how much recruitment slowdowns are because of measures announced in the Budget, but added: “We do anticipate further headwinds from the NI rise, as well as the 6.7 per cent National Living Wage increase, both due to come in to effect in April next year, which are set to weigh particularly on lower-paid sectors and for the hiring of permanent employees.
“Even in advance of the changes in April, we are seeing that temporary seasonal job postings are down.”
He said retailers “appear to be anticipating a sluggish Christmas trading period” and are “looking to limit their staffing costs”.
The Bank of England has said it expects the Budget to increase inflation by 0.5 percentage points.
“I think there’s an unspoken redress of the balance in some of the Government’s policy between the interests of employees and the interests of consumers. And people are both – how that plays out is difficult to tell,” Mr Carberry added.
“But I do think it will become increasingly obvious to people, as they see inflation stay higher for longer, maybe some of the terms of trade they’ve had with companies slightly changing.”
In a speech ion Monday, Rain Newton-Smith chief executive of the Confederation of British Industry (CBI) said businesses had been “caught off guard” by the Budget would make it more difficult to achieve economic growth.
“The rise in national insurance, the stark lowering of the threshold, caught us all off guard,” she said.
“Along with the expansion and the rise of the National Living Wage – which everyone wants to accommodate – and the potential cost of the Employment Rights Bill, they put a heavy burden on business.”
Reeves defended her Budget decisions on Monday, saying: “I have heard lots of responses to the government’s first budget but I have heard no alternatives.
“We have asked businesses and the wealthiest to contribute more. I know those choices will have an impact.
“But I stand by those choices as the right choices for our country: investment to fix the NHS and rebuild Britain, while ensuring working people don’t face higher taxes in their payslips.”
