Chris Evans
2nd April 2025
Labour-Heavy Industries at Breaking Point: Plimsoll Flags 5 Sectors Most Exposed to April’s NIC Hike
Labour-Heavy Industries at Breaking Point: Plimsoll Flags 5 Sectors Most Exposed to April’s NIC Hike
The impending increase in employer National Insurance Contributions (NICs), set to take effect in April 2025, has cast shadow over several UK industries, particularly those heavily reliant on human labor. Chancellor Rachel Reeves announced in the Autumn Budget that employer NICs will rise from 13.8% to 15%, with the threshold for mandatory payments dropping from £9,100 to £5,000. This change is projected to add approximately £25 billion to employers' NIC obligations.
Businesses across the nation are expressing concern that this hike will exacerbate existing economic challenges, potentially leading to reduced employment, increased redundancies, and higher costs passed onto consumers.
A recent survey conducted by the Recruitment and Employment Confederation (REC) underscores the apprehension among employers. Despite some improvements in business confidence, the looming NIC increase continues to dampen hiring intentions. Neil Carberry, REC’s chief executive, emphasized that while there are signs of optimism, the NIC hike "hangs over this like a fog," suggesting that businesses had hoped for more supportive measures from the Spring Statement to drive growth.
Industries with low sales per employee are particularly vulnerable to increased labor costs. Plimsoll, the financial analysts renowned for providing early warnings of financial distress across nearly 2000 industries within the UK economy, has highlighted five key sectors at significant risk due to their labour-intensive nature:
With an average sales per employee of £29,000, the commercial cleaning sector operates on thin margins. The Plimsoll Analysis studies the long-term financial health of 1,700 leading UK commercial cleaning companies. It reveals that 249 of those businesses are serial loss-makers, while 722 others are achieving optimal profits. The NIC increase will put significant strain on the already weakened first grouping of companies, potentially leading to service cost hikes, workforce reductions and potential consolidation in the market.
Home care providers, averaging £31,000 in sales per employee, are integral to the British healthcare system. However, the latest Plimsoll Analysis of the 1,900 most important providers shows that 301 are consistently unprofitable, and sales per employee is already declining. With a sizeable increase in labour costs amid a wider government spending squeeze, the additional NIC burden may force some providers to cut services or staff, impacting care quality and availability for vulnerable populations.
Day nurseries, with average sales of £33,000 per employee, are already under huge financial pressure due to rising staff costs. The Plimsoll Analysis of 2,000 Day Nursery operators shows that 277 are serial loss-makers, and over a quarter of companies have been given a Plimsoll Danger Rating. The NIC hike, coupled with minimum wage increases, threatens the viability of many nurseries, potentially leading to closures and reduced childcare availability.
Care homes, averaging £42,000 in sales per employee, face significant challenges with the NIC increase. The Plimsoll Analysis of 2,400 care home companies reveals that 255 are serial loss-makers, while 1,103 are profitable. The additional financial strain may lead to cost-cutting measures that could affect the quality of care provided to residents. Watch out for consolidation in the market as more profitable, cash rich operators buy up loss making homes to achieve economies of scale.
The manned guarding industry, with average sales per employee of £47,000, is also at risk. The Plimsoll Analysis of 1,161 companies in this sector indicates that 134 are consistently unprofitable, while 479 are achieving strong profits. The NIC increase may compel companies to reassess their staffing levels or increase service charges, impacting both employment and client relationships. British companies might expedite the inevitable pivot to tech-based provisions such as CCTV, robotics and drones to replace their increasingly expensive human resources.
A Plimsoll Analysis on any industry serves as a critical tool for identifying companies that may struggle under the weight of increased labor costs. It acts as an early warning to companies in your market that are least prepared for unforeseen shocks. By continuously evaluating financial health and profitability preparedness, Plimsoll provides early warnings of potential financial distress in your market enabling businesses to take proactive measures.
Like all crises and economic changes, NIC increases will have an outsized effect on those already in financial difficulty. Plimsoll gives stronger companies the ability to see, ahead of time, how well balanced their business is and who among their competitors is most exposed.
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