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00:00I think the most important thing for us is trying to work out what is normalisation after the

00:04pandemic and what is a real downturn. I think for the last year we've seen elements of a real

00:09downturn. It should be no surprise to anyone really that you see unemployment going up to 5%.

00:14The redundancy data is particularly stark. Redundancy is up by about 30% by comparison

00:19to this time last year. All of that is about businesses adjusting to a higher cost space.

00:23Yes, the NI rise obviously. Earlier this year, payroll taxes going up, but also other taxes

00:29and higher inflation generally. More recently, maybe just a little bit more hope. The vacancy

00:38numbers have been dropping for two or three years. They've stabilised in the last couple of months

00:43at just below the pre-pandemic level. A lot of what we're getting back from recruitment businesses

00:49across the country was there was a little bit of a turn in sentiment at the beginning of September.

00:53Maybe people had played through their adaptation to all these rising costs. So now, as you say,

01:01they're looking nervously to the budget because they had an experience last year where the October

01:05budget, the Halloween fright, scared the market and slowed down hiring. They really want the

01:12Chancellor not to kill it this year.

01:14And we want to get your views on the budget. Before we get there, just in terms of the mixed

01:17nature of this data then, what are you seeing across the economy, the different sectors?

01:24Where is the pain most acute? Where is there more resilience?

01:27Labour intensive sectors have seen by far the most pain all year. That's true again in this

01:34sector. So you're looking at retail, you're looking at hospitality. We have a lot of very

01:38high labour costs, very much affected by the national insurance increase and affected by slowing

01:43consumer spending, as Caroline said a minute ago. Interesting one that took me slightly by

01:48surprise this morning is information and communication. So tech is not quite there yet.

01:54Companies are spending on tech, but they're spending on very specific verticals rather than

01:58more broadly in tech development. And I think we'll know there's a real bounce coming when

02:04we start to see that turn. We've certainly seen construction, though, start to turn in the

02:08last couple of months and anything in logistics. Turn positive. Turn positive. And anything in

02:13logistics looks pretty positive as well. OK. In terms of the budget, you, and I think

02:20quite representative of a lot of what business has said, you want more focus on not increasing

02:29business taxes and on trying to work on economic growth and trying to build skills and training

02:34programmes, basically support for workforce participation. What do you want to see in the

02:40budget? Because the Chancellor has given ever stronger hints that there will be tax increases and

02:46potentially that would include payroll taxes. Well, I think the most important thing is if there

02:51are tax rises in the budgets, we leave payroll taxes alone. The Chancellor took a swinging swipe at

02:58national insurance last year, not just in increasing the rate, but in reducing the threshold,

03:03which is one of the reasons why we see so much pain coming from hospitality, retail sectors,

03:08where the threshold had a particular effect because wages, on average, tend to be lower.

03:15I think if there are to be tax rises, if they're for business, they have to come on profit,

03:20not on activity, because that will move things on. Away from taxes, let's be clear, the public sector

03:27productivity data is an absolute mire. Every pound we spend in the public sector, we are getting less

03:35from every year than we got before the pandemic. There has to be some form of progress on what we

03:41get for our tax money. I think businesses quite reasonably want to see a willingness to tackle

03:46rising costs. We talk about doing more with less in business. You can't do less with more, which has

03:54been the story in the public sector for the last couple of years.

03:57Just going back to your point about payroll taxes and really wanting to avoid that in the budget,

04:02if that does come through and if that's where the Chancellor goes on November the 26th, is this

04:06the government that can really claim still to be pro-business?

04:09I don't think you could. I think broadly, businesses gave a very clear message of what

04:14would happen if you changed employers last year, and we do think that that was a breach

04:18of the manifesto commitment then. Those things have happened. I talked to my colleagues at UK

04:24Hospitality, they're talking north of 100,000 jobs lost in hospitality since this time last year.

04:31So there are particular things that have come forward. For instance, the changing of rules on

04:38pensions contributions, businesses need the government to be thinking about second-order

04:43effects. Ending salary sacrifice for pensions is punishing good employers who are doing the

04:48right thing and encouraging employers to outsource more of their longevity risk onto the Treasury.

04:55It's self-defeating. So I think more thought about second-order effects in the budget and more focus

05:00on the long term. Because I think if you look at the gilt markets, the gilt markets care less

05:04about the profit and loss account for 2025-2026 than they do about the long term position of the fiscal

05:13picture going out to 2030-2035.

05:16OK. I mean, it's the pension contributions that look to be one of the big changes that could come,

05:24but also on income tax, that there could just simply be an income tax increase for workers.

05:29Would that satisfy you?

05:31I don't think anyone would be satisfied with an income tax increase. But what I would say,

05:35I tend to agree with the consensus of most economists that if you need to raise taxes,

05:41you should stop fiddling around the edges and trying to find things that people might not notice

05:46and actually go in through the front door.

05:49OK. Lastly, very briefly, a word also on 1,000,000, 16 to 24-year-olds not in employment,

05:56education or training in the UK. The government's got to do something about that, surely? That would

06:00be a measure that you would want to see?

06:02Well, those numbers have been moving glacially slow. We made no progress on inactivity really

06:08over the last year. And the truth is, you get people out of inactivity by getting them into work,

06:13they need an employer. The story is always the same in labour market slowdowns. It's the young,

06:19the lesser skilled, the lower paid who suffer most. So a lot of the wages of the NI decision are

06:26actually hitting that very group, encouraging businesses to take fewer chances on people.

Highest Unemployment Since Covid 'Stark' News For UK Economy

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