Being the season of goodwill and all that. Everybody is reading about :

• 127 ways of roasting a turkey/goose/chicken
• Why do the British put cream/custard/ice cream on meat pies (mince pies-for all Non Brits) ?
• How to feed a family of four at Christmas for £1.78
• Why a Local Vicar is telling small children that Father Christmas does not exist

I felt the need to write something completely inappropriate and what could be more inappropriate than National Insurance Contributions.

I try very hard not to say anything about politics, there are bucket loads of people who can do that for better or for worse . I am politically disenfranchised . I think those on the left, on the right and the centre have lost the plot . And not just in the UK .

Therefore, my question here is not aimed, in this case against the Labour party or their last budget , about which I have many other more pressing questions, but the effect it will have or not have on UK Businesses.

UK Business Plc is jumping up and down, screaming from the roof tops that it is sheer madness and will make prices will go through the roof or the entire economy will collapse over night. Whilst I dont’t think it will induce growth , and I think there are better ways to fill the black holes, if you drill down, I need to be illuminated as to why it will have such a detrimental impact on costs and then prices in the way that is being suggested .

A rise of 1.2% on a rate of 13.8% significant. The calculation I have found is that this will make a increase for an organisation employing somebody on the new minimum wage of £12.21 of approximately 0.4% . However, if you look at various data sources, the cost of labour to a UK business as a percentage varies between 15% -40% , very much dependant on the type of organisation . This would equate (even at 40% ) to the new NIC adding less than 0.2% to a company’s costs. The sort of increases facing companies on a daily basis make this pale into insignificance. Or relative insignificance. The increase in the minimum wage alone will have a much bigger impact on company costs. But not surprisingly that is not what the headlines are, as it is difficult to argue that increasing the lowest wage is a bad thing.

Here is an example:

Morrisson Supermarkets in an article on retailgazette.co.uk said the NIC would cost them £75 million. According to their 2022/23 balance sheet their wage bill was just north of £3 Billion. The £75 mil equates to 2.5% . 1.2% increase = £36 million. Their sales turnover was £18 billion in 2023.

This is not to pick on Morrisons, as I suspect other major chains have similar cost profiles. But it is very diffcult to imagine that a 1.2% increase in their labour costs would have a major impact on their performance, especially as some of this would be obviated by marginal price increases, all off which are the same for all their competitors. Moreover, in their case they are undergoing a cost cutting exercise including reducing their debt levels by 40%.

Shoe Zone, a UK retail chain of shoe shops are planning to close stores because of both NIC and Minimum Wage increases . It does not make sense. They state that their position in the market makes them very price sensitive . Well, its the same for theother discount shoe stores. And let’s remind ourselves this is the minimum wage not the National Living Wage.

The issues facing 2025 for the UK businesses ( and much of Europe) are general rising costs , very flat consumer demand, and political uncertainties. An argument over NIC is just the tip of an iceberg and enables Business to voice it’s concerns via a soft target. Some financial journalists are already saying the budget has already impacted on prices when none of them come into effect until April 2025.

Whilst I don’t see any economic growth with this budget there could be be grwoth in inflation due to the increase in NIC & Min Wage . Not terribly helpful as this will hinder and delay future interest rate cuts which would help growth.

If I have got this wrong , I would really like to know , otherwise Seasons Greetings ! And yes the last 2 images are AI generated – What fun we have …..Or is it what fun it has with us !