Two major CN100 firms have warned the changes to employers’ National Insurance (NI) will hit the construction sector hard.
Directors at Glencar – the 53rd biggest contractor in the UK – and Seddon – the country’s 100th biggest construction firm – told Construction News the planned changes will be a “slap in the face” for all contractors who employ their staff directly.
Chancellor Rachel Reeves last month announced a 1.2 percentage point increase in employers’ NI contributions from April 2025.
The threshold at which employers start paying NI on each employee’s salary will also drop from £9,100 to £5,000. Reeves said the measures would raise £25m for public services, and that small and medium-size businesses would be protected from the increase.
Glencar chief executive Eddie McGillycuddy said the measure would “sting a bit” and the changes were “ill-thought-out”.
Glencar has more than 300 directly paid employees, he said, adding that the reverberations would be felt beyond the construction industry.
“You’ve got mass retail guys who are going to have to let people go in their thousands, because that is going to cost them tens, if not hundreds, of millions,” he added.
“I’m just not sure if the benefits outweigh the negatives.”
Steve Mulholland, chief executive of the Construction Plant-hire Association, said the NI increases, coupled with the increase in the living wage, was “very, very narrow-minded” and would hit businesses across the construction sector.
Nicola Hodkinson, Seddon’s director of business services, called the chancellor’s announcement “a slap in the face for all those contractors who employ labour directly”.
“We’re in a sector that only has profit margins of 2.5, 3.5 or 4 per cent if you’re lucky – so where do you go?” she added.
“When you’re pricing jobs nine months before you get on site, on schemes that have two years to run out, and you have to put in your labour costs – it’s not good.”
Despite his concerns around the NI increase, McGillycuddy welcomed the government’s commitment to reforming the planning system.
“Those planning resources will hopefully release a lot of schemes that have stalled in planning, into construction,” McGillycuddy said.
“That brings a lot of benefits into the economy, a massive amount of benefits in terms of people employed. Someone is working – that means materials coming in, fuel is coming in, plant is being worked on – the whole knock-on effect of getting these schemes on site is significant.”
Glencar director Chris Gleave – who set up Glencar with McGillycuddy back in 2016 – said: “If we can start bringing those rewards from those improvements, hopefully it might take a bit of a sting out of the tail with regards to the increase in NI.”
A Treasury briefing has claimed that the increasing the employment allowance to £10,500 means that 865,000 employers will pay no NI contributions at all next year. It has also claimed employers will be able to employ up to four full-time workers on the National Living Wage and pay no employers’ NI .
An HM Treasury spokesperson told CN: “With our public services crumbling and an inherited £22bn fiscal black hole, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability.
“This was a once in a Parliament budget to wipe the slate clean. We’ve done that now, have capped corporate tax at 25 per cent and have confirmed full permanent expensing. Working together with business we’re determined to unlock the growth opportunities of our country for the future.”
