Cliff Nicholls runs two trampoline parks and indoor play centres: one in Tamworth in the West Midlands, the other in Bolton, Greater Manchester. He’s already feeling the pressure from the government’s latest budget measures and has been forced to abandon further investment plans.

“The national minimum wage increases coming in April, combined with the reduced thresholds for national insurance and the increased rate of employers’ national insurance, will have a very significant impact,” Cliff said.

To cut costs, he’s already made drastic changes. “We’ve had to take some fairly radical decisions, reducing our opening hours, making a senior staff member redundant because of rising business costs, including business rates and national insurance,” he added.

While policies like the National Living Wage (NLW) increase are designed to support low-paid workers, other changes could offset these benefits.

One major shift is the reduction in the salary threshold at which businesses start paying employer’s national insurance contributions (NICs).

Currently, employers begin paying NICs when an employee earns more than £9,100 per year. From April 2025, this threshold will drop to £5,000. At the same time, the employer’s NI rate will rise from 13.8% to 15%.

Scroll through to see Cliff’s staffing finances

Under the new system, an employer will be paying nearly £800 more in NICs annually for an employee earning around £23,800 (based on a 37.5-hour week at the new NLW).

The rise in NICs will be proportionally higher for employers of lower-paid workers. For example, they will pay around 7% for someone earning £9,000 a year and 3% for an employee on the NLW. But for someone earning £75,000 a year, employers will pay 2% more.

Extended employment rights and business rates add pressure

Labour also announced a series of employment rights reforms aimed at improving working conditions. These include extending statutory sick pay to lower-paid employees who were previously ineligible and making it available from the first day of illness for all workers.

The changes would also enable employees to claim unpaid parental leave from their first day in a job, strengthen protections against unfair dismissal, and enhance rights for those on zero-hours contracts.

The government estimates that these employment rights changes will cost businesses around £5bn.

Nye Cominetti, principal economist at the Resolution Foundation, said: “What concerns me is that employer national insurance increases, like the minimum wage and employment rights changes, disproportionately impact low-paid workers.

“For instance, extending statutory sick pay to those previously ineligible adds costs for employers already facing higher NICs and rising wages. In this context, it would have been more sensible to raise tax revenue in a way that didn’t hit low-paid workers the hardest.”

But for Cliff, the changes to business rates relief are an even bigger challenge. Budget changes will mean business rates relief will drop from 75% to 45% for retail, leisure, and hospitality businesses, significantly increasing his costs.

“The business rates changes probably have a bigger impact on us than national insurance,” he explained.

“One of our buildings used to be in a prime edge-of-town retail park 25 years ago. The rental value has dropped significantly since but business rates haven’t kept pace. Next year, we’ll be paying between £55,000 and £60,000 more just in business rates.”

Cliff is not alone in his concerns.

Research conducted by the Federation of Small Businesses found that in the final three months of last year, confidence among small firms fell to its lowest level in a decade, excluding the pandemic.

Are these changes impacting inflation?

Higher prices for food, goods, and services will also put pressure on working people.

New data from the Office for National Statistics shows that inflation rose to 3% in January 2025, the highest level in 10 months.

Many businesses had warned this would happen, saying that rising national insurance costs and the increase in the NLW would leave them with no choice but to raise prices.

The latest Quarterly Economic Survey by the British Chambers of Commerce, conducted after the budget, surveyed more than 4,800 businesses. It found that more than half expect to increase prices in the next three months, up from 39% in the third quarter of 2024.

Businesses are making tough decisions

Signs of pressure are already emerging.

Lord Wolfson, a Conservative peer and chief executive of Next, has warned that it will become harder for people to enter the workforce.

In an interview with the BBC, he said that the rise in NICs for businesses would hit the retail sector particularly hard, with entry-level jobs most affected.

He urged the government to phase in the tax changes rather than implement them in full in April, warning that otherwise, businesses would be forced to cut jobs or reduce working hours.

While it is not possible to fully attribute this to budget announcements, early data suggests that the workforce has been shrinking across various industries since October 2024, with the biggest declines in sectors that employ large numbers of lower-paid workers, such as manufacturing, retail, and hospitality.

Since the budget, the number of payrolled employees has fallen by more than 10,000 in manufacturing and nearly 9,000 in hospitality.

Since the budget, voluntary liquidations have remained consistently high and from December 2024 to January 2025 voluntary business closures have gone up by 9%.

While this can’t be solely attributed to upcoming budget measures, it does highlight the challenges businesses are facing and the difficult decisions they are making as a result.

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An HM Treasury spokesperson said: “We delivered a once-in-a-parliament budget to wipe the slate clean and deliver the stability businesses need to invest and grow, while protecting working people’s payslips from higher taxes, ensuring more than half of employers either see a cut or no change in their National Insurance bills, and delivering a record pay boost for millions of workers.

“Now we are going further and faster to kickstart economic growth and raise living standards, with a majority of business leaders confident that the chancellor’s plans will help drive business investment.

“This includes backing businesses to create wealth across Britain by capping corporation tax, making full expensing permanent and permanently cutting business rates for retail, hospitality, and leisure businesses on the high street from next year.”

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Parents who are entitled to hours of free childcare should not have to pay mandatory extra charges to secure their nursery place, the government has said.

Updated guidance from the Department for Education states that while nurseries are entitled to ask parents to pay for extras – including meals, snacks, nappies or sun cream – these charges must be voluntary rather than mandatory.

The guidance, which comes amid concerns that parents have faced high additional charges on top of the funded hours, also states that local councils should intervene if a childcare provider seeks to make additional charges a condition for parents accessing their hours.

Since September last year, parents and carers with children aged nine months and older have been entitled to 15 hours of government-funded childcare a week, rising to 30 hours for three to four year-olds.

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From this September, the 30 hours of care will be made available to all families – a rollout that was first introduced under the previous Conservative government.

However, there have been concerns that in order to subsidise shortfalls in funding, nurseries have charged parents extra for essentials that would normally have been included in fees.

Under the new guidance, nurseries will be now obliged to clearly set out any additional costs parents will have to pay, including on their websites.

It says invoices should be itemised so parents can see a breakdown of the free entitlement hours, additional private paid hours and all the additional charges.

‘Fundamental financial challenges facing the sector’

Representatives of childcare providers welcomed the announcement but pointed out the financial stress that many nurseries were under.

Neil Leitch, chief executive of the Early Years Alliance, said: “While we fully agree that families should be able to access early entitlement hours without incurring additional costs, in reality, years of underfunding have made it impossible for the vast majority of settings to keep their doors open without relying on some form of additional fees or charges.

“As such, while it is absolutely right that providers should be transparent with parents on any optional additional fees, today’s guidance does absolutely nothing to address – or even acknowledge – the fundamental financial challenges facing the sector.”

He added: “Given that from September, government will control the price of around 80% of early years provision, it has never been more important for that funding to genuinely reflect the true cost of delivering places.

“And yet we know in many areas, this year’s rate increases won’t come close to mitigating the impact April’s National Insurance and wage rises, meaning that costs for both providers and families are likely to spiral.”

In last year’s budget, Chancellor Rachel Reeves announced that the amount businesses will pay on their employees’ national insurance contributions will increase from 13.8% to 15% from April this year.

She also lowered the current £9,100 threshold employers start paying national insurance on employees’ earnings to £5,000, in what she called a “difficult choice” to make.

Last month a survey from the National Day Nurseries Association (NDNA) found that cost increases from April will force nurseries to raise fees by an average of 10%.

The survey, covering nurseries in England, revealed that staffing costs will increase by an average of 15%, with respondents saying that more than half of the increase was due to the national insurance decision in the budget.

Purnima Tanuku CBE, chief executive of the NDNA, said “taking away the flexibility for providers around charges could seriously threaten sustainability”.

“The funding government pays to providers has never been about paying for meals, snacks or consumables, it is to provide early education and care,” she said.

“Childcare places have historically been underfunded with the gap widening year on year.

“From April, the operating costs for the average nursery will go up by around £47,000 once statutory minimum wages and changes to national insurance contributions are implemented. NIC changes have not been factored into the latest funding rates, further widening the underfunding gap.”

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The Department for Education said its offer to parents meant they could save up to £7,500 on average when using the full 30 hours a week of government-funded childcare support, compared to if they were paying for it themselves.

In December, the government also announced that a £75m expansion grant would be distributed to nurseries and childminders to help increase places ahead of the full rollout of funded childcare. 

Local authority allocations for the expansion grant will be confirmed before the end of February. Some of the largest areas could be provided with funding of up to £2.1m.

Shops were given a surprisingly big boost in January as official figures showed retail sales rose by 1.7%.

Only a 0.3% rise had been forecast by economists polled by Reuters.

It’s the first growth since August and follows a fall of 0.6% in the key shopping month of December, according to Office for National Statistics (ONS) figures.

Not since May has there been a rise this large.

The December drop was even larger than first thought. Initially, only a 0.3% contraction was recorded by the ONS.

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The large rise in January came as food shop sales rose 5.6% – the greatest amount since March 2020 when COVID-19 lockdowns began.

Shops across the food and drink sector benefitted, the ONS said, as supermarkets, alcohol and tobacco stores plus specialist shops like butchers and bakers all reported strong trading.

Retail sales figures are significant as they measure household consumption, the largest expenditure across the UK economy.

Growing retail sales can mean economic growth, which the government has repeatedly said is its top priority.

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Combined with other data released on Friday showing improved consumer sentiment the figures show a strengthening economy.

Wage rises and interest rate cuts helped to raise the longstanding consumer confidence measure by market research company GFK.

This increase had also not been expected by economists.

“The biggest improvement is in how consumers see their personal finances for the coming year with an increase of four points that takes this measure out of negative territory”, said Neil Bellamy the consumer insights director at NIQ GfK.

“The rate cut will have brightened the mood for some people, but the majority are still struggling with a cost-of-living crisis that is far from over.”