Fallout from budget continues as more companies reveal impact

It’s been two weeks since Labour’s Employer National Insurance budget announcement and we’ve lost count of the number of companies and industries that have spoken out to describe the inflationary (and in some cases existential) threat this poses to them.

The issue is several-fold. When new minimum wage requirements plus higher NI contributions kick-in next April, the upward pressure on wages will not just affect those on the minimum wage but ricochet up through the salary bands as existing workers seek to keep their pay differential. This will magnify the effect of higher NI contributions.

What’s also becoming apparent is that, as all companies in the food supply chain are affected and need to increase their prices to customers, so price rises will also be magnified the further up the chain you go, starting at farm businesses and ending with consumers.

If we apply the recent Institute for Fiscal Studies projection of £900 extra NI contribution per employee on a median average wage of £33,000, the meat industry alone would have to absorb or pass on an extra £90 million per year in cost from average margins of 2-4%. That’s if all wages stay the same and no extra cost is levied by suppliers. On top of all the other extra costs of doing business because of Brexit, this will only mean one thing. Food price inflation.