It is difficult to imagine a worse time to introduce a rise in employer
National Insurance Contributions. Employers, employees and even customers may
ultimately pay the price as it adds yet more pressure to the already stricken
The profitability of UK firms has fallen to its lowest level for a decade
and Gordon Brown’s move, which comes into effect this month, could provoke
further transfers of work overseas and more job cuts. The Anglo-Dutch
steelmaker, Corus, is reported to be absorbing £5m of extra costs due to the
NIC increase and construction vehicle firm Caterpillar predicts a £2m annual
bill. Weak productivity continues to stop any recovery in margins and in many
markets, firms simply cannot pass on these additional costs to customers.
The secretary of state for industry, Patricia Hewitt, is working hard to
convince employers she is listening to their concerns. She is championing
initiatives to lift productivity and last week pledged to help business plan
ahead by limiting the introduction of any new rules to just two days per year.
These supportive measures are welcome, but the relationship between business
and the Government is certainly entering a new phase. Employers want less
interference, and yet the Government seems to be insisting on a ‘deeper
partnership’ with no clarity about what that actually means.
Productivity is the key area where the Government can make a difference. As
this is the CIPD’s HRD week at Olympia, we are reminded of the mountain
employers must climb to boost productivity and competitiveness through
training, development and organisational change.
Our front-page coverage and feature confirm how tough it is to raise
capabilities when resources are tight.
Skills gaps cannot be ignored for long – firms are struggling to meet
customer service standards, to generate new business and develop new products
because some core competencies have not been developed.
These volatile times warrant strong and measured management. Employers are
crying out for stability and flexibility and have no appetite for more taxation
and further labour market regulation. A lightness of touch from the Government
would be the best course of action right now.