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Business groups have criticised plans for a National Insurance hike as a drag on jobs growth just as firms seek to recover from the COVID-19 crisis.

The 1.25 percentage point increase in NI contributions is intended to pay for reform of the social care system.

But the British Chambers of Commerce (BCC) said it would hit the wider economic recovery while Make UK, representing the manufacturing sector, said it was “ill-timed as well as illogical”.

The announcement comes as businesses try to rebuild after more than a year of lockdowns and trading restrictions – which has left some of them heavily indebted – and the furlough support scheme draws to a close.

Firms are also facing cost pressures due to strained supply chains and labour shortages thanks to Brexit and the pandemic.

Suren Thiru, head of economics at the BCC, said: “Businesses strongly oppose a rise in National Insurance contributions as it will be a drag anchor on jobs growth at an absolutely crucial time.

“Firms have been hammered by 18 months of COVID-related restrictions and have built up huge debt burdens.

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“This rise will impact the wider economic recovery by landing significant costs on firms when they are already facing a raft of new cost pressures and dampen the entrepreneurial spirit needed to drive the recovery.”

Stephen Phipson, chief executive of Make UK, said: “Industry fully supports the need to increase funding to the NHS and social care which is one of the most important issues we face as a society.

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UK’s furlough scheme starts to wind down

“However, an increase in National Insurance is not just a tax on employers but also employees.

“Putting a tax on jobs and workers at a time when government is pulling the furlough scheme is ill-timed as well as illogical.

“Government should be putting in place measures to protect jobs and incentivise recruitment.

“An increase to NI would have the opposite effect.”

Mike Cherry, national chair of the Federation of Small Businesses, said it was “an anti-jobs, anti-small business, anti-start up manifesto breach”.

“These hikes will have business owners and sole traders feeling demoralised at the point when they’re trying to recover from the most difficult 18 months of their professional lives,” Mr Cherry said.

“For those thinking about starting up, they send completely the wrong message.

“Business owners who have done all they can to retain and support their staff during the pandemic are now being punished for that loyalty with an £11bn increase in NICs [National Insurance contributions], which essentially serve as a jobs tax.

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‘Perfect storm’ for retailers as Brexit and pandemic hit, says babywear boss

“This regressive levy hits employers and sole traders without meaningful regard for how their business is performing.

“This increase will stifle recruitment, investment and efforts to upskill and improve productivity in the years ahead.”

Business groups also took aim at a 1.25 percentage point increase in the rate of tax on dividend income from shares.

ISA savings accounts are exempt from the tax and it is only payable on dividend income over £2,000 meaning that even outside ISAs, 60% of people with dividend income would not be affected according to the government.

However, small company directors look set to lose out, the Institute of Directors (IoD) said.

Kitty Ussher, the IoD’s chief economist, said: “Incorporated sole traders and other owner-managers, who relied on dividend income, were the only group of workers that were not supported by government during the pandemic.

“Employees and the self-employed were provided with financial support to tide them over, but this group was not.

“While it may make sense in the long-term to align tax rates for all types of income, this government has shown through its actions a total lack of understanding to the very real difficulties faced by owners of the smallest businesses in Britain.”

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Farage and Tice right to scrutinise one of Bank of England’s most radical monetary experiments in history

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Farage and Tice right to scrutinise one of Bank of England's most radical monetary experiments in history

There was some speculation, when it emerged that Nigel Farage was heading to Threadneedle Street to see the Bank of England governor, that he was about to “do a Trump”.

You might recall, if you follow American politics, how the US president has been, for want of a better word, trolling the chairman of the Federal Reserve, Jerome Powell, threatening to fire him if he didn’t cut interest rates. Might Mr Farage and Reform be about to do the same thing in the UK, raising deep (and, for economists, scary) questions about the independence of the central bank?

The short answer, as far as anyone can tell following today’s meeting, is: no. Instead, Mr Farage and his fellow Reform MP Richard Tice enjoyed a relatively cordial meeting with the governor, where they discussed the intricacies of quantitative easing, the Bank’s reserves policies and even cryptocurrency – a slightly unexpected addition to the agenda which might reflect the fact that Reform is hoping to raise lots of campaign funds from crypto dudes.

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The main Bank-related issue Reform has been campaigning on – Mr Tice in particular – comes back to something seemingly arcane but certainly important. As you may be aware, in recent years, the Bank of England has, alongside its interest rate policy, been engaged in something called quantitative easing (QE). QE is complex, but it boils down to this: in an effort to boost the economy, the Bank bought up a lot of government bonds and they now sit awkwardly in its balance sheet. In recent months, the Bank has begun to reverse QE (quantitative tightening) – selling off billions of pounds of bonds.

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Bank of England’s £134bn gamble

Anyway, reach deeper into the arcane mechanism of how QE works and something interesting leaps out. Two things, actually. First, as part of QE, in order to get hold of those government bonds, the Bank created “reserves” – sort of bank-account-at-the-Bank-of-England – for the high street banks from whom it bought them.

Tens of billions to high street banks

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Those reserves earn interest at the Bank’s official interest rate. At the time of QE, the rate was near zero, so no one spent much time thinking about reserves. But since then, rates went up to 5.25%, and are now at 4%, and hence the Bank has recently been paying out a hefty amount – tens of billions of pounds – in interest to high street banks.

Reform UK leader Nigel Farage (left) and deputy leader Richard Tice speaking to the media outside the Bank Of England in central London. Pic: PA
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Reform UK leader Nigel Farage (left) and deputy leader Richard Tice speaking to the media outside the Bank Of England in central London. Pic: PA

This, says Richard Tice, is an abomination. In the last Reform manifesto, he said the Bank should stop paying out those reserves. Which, on the face of it, sounds perfectly sensible. However, there are a few catches.

A big bank tax

The first is that while in theory it might help recoup billions of pounds of public money, that money has to come from somewhere, and in this case, it would come from high street banks. In other words, this is, in all but name, a very big bank tax. The Bank of England’s point, when asked about all this, is that if anyone is going to do something like that, it should really be the government, since it’s rightly in charge of taxing and spending.

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The other catch is that Bank of England reserves systems are desperately complex. Changing the way they’re structured is a delicate operation. Running a coach and horses through it, as Mr Tice is suggesting, could have all sorts of unintended consequences, including undermining confidence in UK economic policy.

This, by the way, is not the only thing Reform is unhappy about: they also think the Bank should slow down its quantitative tightening programme.

But the point of all the above is that while there are some big question marks about the particular idea Reform is proposing, the worst thing of all would be not to discuss this as publicly as possible.

The worst outcome of all would be for the government and Bank to take certain decisions which affect billions of pounds of public money with only the merest of scrutiny, save at the Treasury Select Committee, whose sessions rarely get much attention beyond the financial pages. And that is more or less the situation we’ve had for the past decade and a half.

The Bank of England has introduced one of the most radical monetary experiments in history, which may or may not have been a success or a failure, but few outside of the City are even aware of it. Mr Tice’s policy platform may be flawed, but his overarching point – that this stuff desperately needs more scrutiny – is quite right.

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Jaguar Land Rover was not insured for cyber attack, journal claims

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Jaguar Land Rover was not insured for cyber attack, journal claims

Jaguar Land Rover (JLR) “failed to finalise” a cyber insurance deal before it was struck by hackers last month, forcing a halt to production and threatening the future of its supply chain, according to an industry journal.

The Insurer, citing three insurance sector sources, said Britain’s biggest carmaker was still in negotiations over cover before the cyber attack at the end of August.

It opens the prospect that the company faces footing the bill for the hacking by itself.

Losses will easily run into many hundreds of millions of pounds, with its global factory shutdown set to last for a month at least.

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JLR shutdown extended

Marks and Spencer, which was targeted back in April, said it expected that the estimated £300m bill it was facing from the disruption would be largely offset by the cyber insurance cover it had taken out.

As frantic efforts continue at JLR to recover its systems, the government is exploring ways to support JLR’s supply chain and the 200,000 jobs within it.

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One idea under consideration, according to ITV News, was taxpayer money being used to purchase parts.

These components could then be sold back to JLR as its manufacturing operations got back up to speed, resulting in no direct losses for the public purse.

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Inside factory affected by Jaguar Land Rover shutdown

The “just-in-time” nature of automotive production means that many suppliers had little choice but to shut down immediately after JLR announced its manufacturing freeze.

Industry sources estimate that around 25% of suppliers have already taken steps to pause production and lay off workers, many of them by “banking hours” they will have to work in future.

Union demands for a COVID-style furlough scheme have not been taken up by ministers, who have said that support to date has come only from JLR.

Industry minister Chris McDonald said on a visit to a West Midlands manufacturer on Tuesday he was “supremely confident” that JLR would get through the cyber attack.

He added: “What I really want this to be is a wake-up call to British industry. I’m affronted by this attack on British industry. This is a serious attack on a flagship of British industry.”

Jaguar Land Rover said it declined to comment on commercial matters.

The government has also been approached for comment.

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Co-op reveals £80m profit hit from cyber attack disruption – with more to come

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Co-op reveals £80m profit hit from cyber attack disruption - with more to come

A cyber attack in April delivered an £80m hit to half-year operating profits at the Co-operative Group, it has been revealed.

The results showed an underlying pre-tax loss of £75m over the six months to 5 July compared to a profit of £3m over the same period a year ago.

The £80m figure included a £20m hit from one-off costs. The impact of the attack on sales revenue was estimated at £206m.

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While the mutual had insurance cover for operational disruption, it did not have a policy to meet full losses arising from a cyber incident.

It further revealed that the total profit damage was expected to nudge £120m over its full financial year.

Co-op was among several retailers hit in April, including M&S, and iall its members had data stolen.

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A Co-op Group store is shown in Manchester during the height of the cyber attack disruption. Pic: PA
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A Co-op Group store is shown in Manchester during the height of the cyber attack disruption. Pic: PA

In-store, customers faced problems making payments initially and latterly empty shelves as the group struggled to restore control of key systems.

It prioritised rural stores for limited deliveries until stocks recovered in late May.

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July: Four arrested over M&S, Co-Op and Harrods cyber attacks

Co-op chair Debbie White said: “The first half of 2025 brought significant challenges, most notably from a malicious cyber attack.

“Our balance sheet strength and the magnificent response of our 53,000 colleagues enabled us to maintain vital services for our members and their communities.

“We must now build our Co-op back better and stronger to meet the challenges and opportunities that lie ahead.”

The attacks on the retailers, which have resulted in four arrests, have brought the insurance issue to the fore as Jaguar Land Rover battles the impact of a similar attack.

Its factories are currently on track to produce nothing for at least a month and the government is now actively considering some kind of taxpayer support for its vast supply chain.

It has been reported that it was in discussions over cyber cover when its systems came under attack at the end of August.

Like the Co-op, it leaves the company facing the prospect of meeting many of the costs itself.

M&S put a £300m cost on the ransomware attack on its own systems ahead of Easter but expects to claw much of that money back through insurance payouts.

The government has this week described the run of hacking attempts as a further wake up call to the business community and urged continued investment in cyber security.

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