Rising employment costs are putting pressure on UK businesses across all sectors. Recent increases in National Insurance contributions and the National Living Wage have pushed payroll expenses higher. For many companies, these changes are more than just numbers—they affect hiring decisions, staff retention, and overall cash flow.
The current landscape
Hiring slowdown and redundancies
The Chartered Institute of Personnel and Development (CIPD) reported in May 2025 that employer hiring expectations are at their lowest non-pandemic level since 2014. Nearly a quarter of employers anticipate making redundancies, with large private-sector companies and retailers most affected.
Impact on younger workers
The Institute for Fiscal Studies (IFS) noted in April 2025 that rising wages and tax contributions have made employing workers aged 18–20 significantly more costly. Some businesses are responding by reducing hiring or laying off younger staff.
Financial distress
According to Begbies Traynor’s Red Flag Alert, 45,416 UK businesses were in critical financial distress as of March 2025—a 13.1% increase from the previous year. Higher taxes, National Insurance contributions, and minimum wage changes are cited as key drivers.
Funding solutions to bridge the gap
When margins are squeezed, businesses may need immediate funding to maintain operations. There are several funding solutions companies can explore to manage these pressures:
Working Capital Loans
Quick to arrange, working capital loans provide funding for day-to-day operational expenses and can offer an immediate cash flow injection.
Invoice Finance
For businesses trading with other companies, invoice finance releases cash tied up in unpaid invoices. You can fund all unpaid invoices or just select customers.
Asset-Backed Funding
Businesses with property, equipment, or other unfinanced assets may unlock capital through asset-backed funding options like sale-and-leaseback arrangements or commercial mortgages.
Pre-Approved Funding
Platforms like Capitalise allow businesses to securely connect bank accounts and receive pre-approved funding in minutes, giving access to flexible options from multiple lenders.
Planning for the future
While short-term funding can plug immediate cash flow gaps, rising payroll pressures may require longer-term adjustments. Companies might review pricing strategies, streamline operations, or invest in automation to offset higher employment expenses. Acting early can prevent short-term pressures from escalating into a serious financial crisis.
Expert support
Navigating rising employment costs can be challenging. For guidance on funding solutions tailored to your business, contact Cian Iddison. Cian can help identify the best options to keep your business financially healthy and resilient.
