IoD: April’s NICs rise will add further fuel to the inflationary fire

On the day that the ONS publishes data showing that annual CPI inflation was running at 5.1% in November, the Institute of Directors releases new survey data showing that the forthcoming rise in employers’ national insurance contributions is itself likely to be inflationary, as well as having a negative impact on employment and investment.

When asked how their organisation might respond to the forthcoming rise in national insurance contributions, 38% of business leaders cited ‘We will raise prices to offset some, or all, of the cost’. A substantial minority (19%) said they would employ fewer people. More firms said they would reduce investment (15%) than would increase investment in technology (10%). Only 29% said they were in a position to absorb the cost increase.

Kitty Ussher, Chief Economist at the Institute of Directors, said:

“Inflationary expectations are rising fast among business leaders, and this should be a cause for concern to policymakers. To make matters worse, we now know that the government’s own decision to raise employers’ national insurance in April 2022 will add further fuel to the inflationary fire, as well as having a noticeable impact on hiring intentions.

“We also find evidence that the NICs rise will exert a downwards pressure on business investment,  in line with independent research from the National Institute of Economic and Social Research published in October.”