This month, a raft of changes from Labour's Employment Rights Act 2025 came into force. Combined with the National Insurance contribution increases that hit employers in April, British businesses - especially small ones - are facing a cost shock that many simply will not survive. This was a choice. Labour made it knowingly. And working people will pay the price.
The Tax Rise Nobody Voted For
Labour went into the last election promising not to raise taxes on working people. Within months of taking office, they raised employer National Insurance contributions - effectively a tax on employment itself. For every member of staff, the cost of having them on the payroll just went up. That cost doesn't disappear. It gets passed on in one of three ways: higher prices for consumers, lower wages for workers, or fewer jobs altogether.
The Office for Budget Responsibility and independent economists warned about this. The business community warned about this. The government dismissed those warnings and pressed ahead. Now the bills are coming in. Hospitality, retail, and care sectors - which rely on large numbers of lower-paid staff - are reporting the sharpest pain. Redundancies are being made. Hiring freezes are in place. Hours are being cut.
The Employment Rights Act Makes It Worse
On top of the NIC rises, the Employment Rights Act 2025 has introduced new obligations that increase the administrative and financial burden on employers. Requirements around holiday record-keeping are now so onerous that failing to keep adequate records is a criminal offence from April 2026. A criminal offence. For a small business owner who doesn't have an HR department and is trying to keep the lights on while managing rising costs on every front.
The government says these reforms protect workers. Some of them have merit in isolation. But the timing - introducing sweeping new employment obligations at exactly the same moment as a major NIC increase - has compounded the pressure on businesses to a degree that is simply reckless. Nobody sat in a room and said: is this the right moment to do both of these things at once? Or if they did, they didn't listen to the answer.
Small Businesses Are the Real Victims
Large corporations can absorb these costs. They have legal teams, HR departments, and the scale to spread overheads. The damage falls on small and medium-sized businesses - the backbone of the British economy and the source of most private sector jobs in constituencies like Preston East. The local pub. The family building firm. The independent retailer on the high street. These are the people the government claims to support. These are the people it is currently crushing.
The tax burden in the UK has risen from 30% of GDP to 37% of GDP over the past few years. That is not a small change. That is a fundamental shift in how much of what we produce goes to the state rather than staying in the economy, in businesses, and in people's pockets. And income tax thresholds remain frozen until 2031, meaning every pay rise drags more workers into higher tax bands without Parliament ever having to vote for a tax increase.
What Reform UK Would Do
Reform UK would reverse the NIC increases on employers. We would raise the employer NIC threshold so that small businesses can afford to take on more staff. We would conduct a proper cost-benefit review of the Employment Rights Act's new requirements and scrap those that impose disproportionate burdens on small employers. And we would commit to a genuine, costed path to reducing the overall tax burden - not just freezing it at a historically high level and calling that a success.
Britain's businesses didn't cause the problems this country faces. Punishing them for existing is not a growth strategy. It is an ideology in search of justification.