Scottish Government seeks National Insurance U-turn as business confidence hits four-year low

The Scottish Government has urged the UK Government to reconsider the increase to employers' National Insurance contributions, warning of "lasting damage" to the economy.

Employment and Investment Minister Tom Arthur claims the move, which aims to raise money for health services, will harm employment, growth and prices for consumers.

The change, announced by Chancellor Rachel Reeves, could cost around £850 per employee, it is claimed.

Arthur said firms now face "the impossible choice of cutting jobs, reducing hours, cutting wages, absorbing the costs themselves, or passing some of the burden to consumers in the form of higher prices".

He said: "Our efforts to support businesses, entrepreneurs and investment are being undermined by this tax on jobs. If the UK Government is serious about economic growth, they must reconsider this decision before they cause lasting damage to Scotland’s economy."

The call comes as the Federation of Small Businesses (FSB) releases new figures showing confidence in the sector has hit a four-year low.

Levels now are said to be at the lowest level since the peak of the Covid-19 pandemic.

The organisation’s Small Business Index (SBI) found confidence fell to -67.2 in the fourth quarter of 2024, compared with -69 for the same period in 2020.

The results mark the third consecutive quarterly decline in small business optimism in Scotland, which the FSB has linked to "uncertainty" in the wider economy.

Three quarters of respondents cited rising costs.

FSB Scotland policy chair Andrew McRae said the "worrying" results show a need for "urgent, concrete government action on the issues that keep small business owners awake at night".

He said: "So many of the pressing issues come down to cost and cashflow. That is why, for example, the government’s plans to tackle late payments, the scourge of many small businesses in Scotland, cannot come soon enough.

"It must also be acknowledged that the upcoming Employment Rights Bill is a serious concern for small firms, with nine out of 10 owners saying they are worried about its introduction."

The UK Government, which is behind that bill, said it is supporting business through measures like a 25 per cent cap on corporation tax.

A spokesperson said it is "championing Brand Scotland to promote Scottish goods and services globally" and the UK Government has delivered lower business rates in England, adding: "We will be publishing our plan to help small businesses start up and grow later this year."