NICs Rise To Add Fuel To The Inflationary Fire

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The IoD has survey data showing that the forthcoming rise in employers’ national insurance contributions is likely to be inflationary, as well as having a negative impact on employment and investment.

The ONS says inflation is running at 5.1% and the Bank of England expects to raise interest rates. Energy prices are flying. Supply chain and distribution are at breaking point. Material prices are set to soar. Brexit is still a pain…and Omicron means Covid could close the country again.

When asked by the Institute of Directors On how their organisation might respond to the forthcoming rise in national insurance contributions, 38% of business leaders said ‘ee 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.

 “Inflationary expectations are rising fast among business leaders. 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.”

– Kitty Ussher 

Chief economist, Institute of Directors

Less investment

“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,” adds the IoD’s Ussher.

The rise

The government plans to increase national insurance contributions from 13.8% to 15.05% from April 2022.

Picture: Inflation is rising and the IoD says an increase in employer national insurance contributions from April 202 will add fuel the fire.

Article written by Cathryn Ellis
16th December 2021

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