Rising National Insurance Costs Lead to Hiring Freeze and Store Closures, Says The Entertainer CEO

The Entertainer, a major UK retailer, has announced a hiring freeze at its head office due to increased operating costs, a decision linked to the government’s planned National Insurance (NI) rate hike. Chief Executive Andrew Murphy explained that the company’s financial outlook has been severely impacted by the changes, leading to a reevaluation of its expansion plans.

From April 2024, the UK government will raise the NI rate for employers from 13.8% to 15%, while reducing the tax threshold from £9,100 to £5,000. This policy change is expected to generate an additional £25 billion annually to help stabilize public finances after the previous government’s revenue cuts.

Speaking on BBC Radio 4’s Today programme, Murphy expressed understanding of the government’s long-term objectives but criticized the approach. “There’s no argument with the government’s ultimate goals… simply the balance with which they pursued them,” he said. Murphy also highlighted that the increased NI rates had altered The Entertainer’s financial viability assessments, forcing the company to scale back plans for new store openings, and ultimately leading to store closures.

The increased costs have raised concerns across the business sector, with other major companies, such as Sainsbury’s and Marks & Spencer, warning that the higher NI rates could lead to higher prices for consumers. Sainsbury’s CEO, Simon Roberts, said the supermarket chain would face an additional £140 million in costs, adding, “It is going to feed through into higher inflation.”

The Labour Party has defended the NI increase, with Chancellor Rachel Reeves stating that the move is necessary to ensure the country’s public finances are put on a more stable footing. “We’ve got to raise the money to put our public finances on a firm footing,” she said in response to business concerns.

As some businesses reconsider their operations, there are signs that rising costs could prompt companies to seek expansion outside the UK. Arnab Basu, CEO of Kromek, pointed to planned US corporate tax cuts and lower energy costs as factors making the US an attractive investment destination. Similarly, George Weston, CEO of Associated British Foods (parent company of Primark), suggested that tax increases could shift the company’s focus to growth outside the UK.

The Treasury defended the NI changes, emphasizing that they are vital for economic recovery. “This government is committed to delivering economic growth by boosting investment and rebuilding Britain,” a spokesperson said.

The Entertainer’s move highlights a growing trend of UK businesses reassessing domestic investments as they face rising operational costs and a changing tax landscape.