The 2024 Autumn Budget: The Impact on Manufacturing and Engineering Recruitment
The first Labour budget for 14 years brought significant changes to the way the Treasury prioritises funds. We examine the key takeaways and look at the implications for recruitment, specifically within the manufacturing and engineering sectors.
Budget 2024 – Key Takeaways
Increase in Employers’ National Insurance Contributions (NICs): The chancellor, Rachel Reeves, announced that from 6 April 2025, the rate at which employers pay National Insurance Contributions on behalf of their employees will rise from 13.8% to 15%.
Reduction in NIC Threshold: The chancellor also announced that the threshold at which employers begin to pay NICs for their employees will fall from £9,100 per year to £5,000 per year.
Rise in National Living Wage: The National Living Wage (NLW) will increase to £12.21 per hour, and the National Minimum Wage (NMW) for 18-20 year olds will increase to £10.00 per hour.
Enhanced Research and Development (R&D) Funding: A commitment of £6.1 billion to support core research in engineering, biotechnology, and medical science sectors was announced. This includes £20.4 billion in investment for UK R&D, including fully funding association to the Horizon Europe research programme, up to £520 million to unlock life sciences investment, and money for regional accelerators across the country. The Department of Science, Innovation and Technology, for example, will receive over £15 billion by 2025, an increase of 6.5%.
Sector-specific Investments: Allocations include £975 million for the aerospace sector, £2 billion for the automotive industry to support electric vehicle (EV) initiatives, and £520 million for a new Life Sciences Manufacturing Fund.
Implications for Recruitment and the Manufacturing and Engineering Industries
The combination of tax rises and increased funding for specific purposes sends a mixed message to industry, but the measures have implications that will directly affect recruitment and both the manufacturing and engineering industries. These include:
Increased labour costs: Although welcomed by low-paid workers, the rise in NICs and the NLW will elevate employment expenses as organisations struggle to absorb the extra costs, potentially affecting hiring decisions and operational budgets. The CIPD warns that this might also lead to "higher prices, accepting lower profits or cutting headcount" without increasing productivity.
Pressure on profit margins: Higher employment costs may lower profit margins, especially for small and medium-sized enterprises (SMEs) in the manufacturing sectors. This may give organisations pause for thought in terms of future investment decisions, and some manufacturers are concerned that rising prices will have a knock-on inflationary effect.
Talent acquisition challenges: With increased costs, companies might face difficulties in attracting and retaining skilled professionals, potentially leading to talent shortages. The British Chambers of Commerce released a survey in October of this year which reveals some concerning statistics. According to the BCC, fewer businesses are looking to recruit new workers, with only 56% of them actively recruiting, and manufacturing businesses being one of the most significantly impacted, with 80% of them facing recruitment difficulties.
Opportunities for innovation: The substantial uplift in R&D funding presents opportunities for companies to innovate and develop new technologies, potentially offsetting increased costs through enhanced productivity and competitiveness. Commenting on the budget, the global charitable foundation Wellcome supported the chancellor’s investment in R&D, noting that "every pound of public support stimulates over £4 of private investment" and added that this money would allow the UK’s universities and businesses to continue to flourish, cementing the UK’s reputation as a world leader in R&D.
Strategies for Companies to Protect Themselves
Despite the uncertainty, there are ways in which companies can protect themselves from the full effect of the budget. These include:
Optimise workforce planning: Conduct comprehensive workforce assessments to identify essential roles and explore more flexible staffing solutions, such as temporary or contract workers, in order to manage costs more effectively. Workforce planning enables organisations to plan for future staffing needs to achieve long-term objectives, allows them to respond with more flexibility to unexpected changes, and improves productivity and retention.
Leverage R&D funding: Actively pursue available R&D grants and incentives to innovate processes and products which can lead to long-term cost savings and market differentiation. UK-based businesses or research organisations can apply for innovation funding from the government for research, product development, or collaboration.
Invest in automation and technology: By adopting automation and advanced manufacturing technologies, businesses can enhance efficiency and reduce their reliance on manual labour, thereby mitigating the impact of increased labour costs. Automation and technology also help businesses improve productivity, scalability, and product quality, ultimately increasing customer satisfaction and competitive advantage.
Collaborate with specialist recruitment agencies: By partnering with agencies experienced in the manufacturing and engineering sectors, businesses can access a broader talent pool and gain insights into competitive compensation strategies.
Here at Employment Solutions, we’ve been delivering high-quality recruitment services to our clients in the engineering and manufacturing sectors since 2001. Whether you’re a candidate looking for a contract or permanent role, or a client looking for exceptional talent, we’ll use our expertise as one of the top ten engineering and manufacturing recruiters in the country to understand your needs and assist you through the process. If you’re concerned about any aspects of the budget’s implications or for information about how we can help with your recruitment solutions, call us on 0161 839 53 53, email us at admin@emp-sol.com, or fill in the contact form here.