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UK – What the Budget means for recruiters

22 March 2013

What changes will the 2013 Budget bring to recruiters? Ben Farber, policy advisor at the Recruitment and Employment Confederation (REC), has analysed the impact of the latest government plans on the UK staffing market.

Changes to national insurance and personal tax allowance are major improvements for staffing firms.  They will be able to benefit from a discount in national insurance contributions on top of a 1% reduction in corporation tax. An increase in personal allowance will also give low-paid workers more money.

While growth figures for this year have been slashed to 0.6%, compared to a previous estimate of 1.2%, there is better news for the construction and engineering industry. A further £3 billion for additional investment in infrastructure should buoy the beleaguered construction sector, said Mr Farber.

“Whether the UK has enough skilled workers to meet additional demand in these sectors is another matter entirely – engineering recruiters in particular are already reporting candidate shortages – and so it’s disappointing that no new measures to boost training and apprenticeships were announced,” he said.

He noted that recruiters should also be mindful of the opportunities that may arise from the new funding strategy for Local Enterprise Partnerships (LEP). “Lord Heseltine’s idea to devolve significant funding for local growth measures directly to LEPs has been embraced by the government, and recruiters with an insight into local labour markets will be well placed to drive investment in their area,” he said.

“One of the most significant issues for agencies over the past two years has been the growth in travel and subsistence schemes, many of which are increasingly pushing the bounds of legality and are profoundly distorting the market,” said Mr Faber.  Staffing companies should therefore “take heart from the extensive package of anti-tax avoidance and evasion measures announced, and in particular the need for the correct income tax and national insurance rates to be paid even where offshore intermediaries are being used.”

Overall, he said the Budget had shown a government with smaller and more targeted growth measures. “Tweaks to the tax code that cut the cost of hiring, reward workers with more take-home pay and reduce the corporate tax burden on businesses are positive examples of such targeted steps that our industry should welcome,” said Mr Faber.

Elsewhere, the Budget has come under criticism from opposition parties, unions and campaign groups. Len McCluskey general secretary of the Unite Union said: “This is a Budget for the few by the few that attacks the many. Millionaires are days away from getting a £40,000 tax cut from the Tories, but George Osborne is using the Budget to attack hard-working public sector workers. 

“The worst Chancellor in British history has gone further by giving big business another tax cut while staff caring for the sick get pay cuts. This Chancellor's idea of aspiration is a warped one. Nurses, police and public servants take a pay hit, while corporations and millionaires are allowed to duck their tax duties to the nation.”

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