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The increase in National Insurance (NI) Contributions for employers, announced in last week’s Budget, has forced toy shop chain The Entertainer to abandon plans to launch two new stores. The move has also led to the head office’s recruitment operations being suspended, according to Chief Executive Andrew Murphy. Sainsbury’s and Marks & Spencer have also hinted that Labour’s NI changes might push up prices for consumers. From April 2017, the employers’ NI rate will rise from 13.8% to 15%, with the threshold lowered from £9,100 to £5,000 – moves that are expected to raise £25bn a year. The Conservatives’ two previous NI rate cuts resulted in around £20bn of lost tax revenue.
Labour has defended their decision to raise NI on the grounds that they are “restoring desperately needed economic stability to allow businesses to thrive”. However, Murphy argued on BBC Radio 4’s Today programme that “there’s no argument with the government’s ultimate goals… simply the balance with which they pursued them.” The Entertainer, which currently employs 2,000 people in 166 shops, had already completed viability assessments for the stores that were to be axed.
Sainsbury’s CEO, Simon Roberts, has said that the roughly £140m the NI changes will add to the supermarket group’s costs will feed through into higher inflation. Other firms, including retailer Primark’s parent company Associated British Foods and radiation detection specialist Kromek, have also indicated that the move may force them to consider expanding overseas instead of in the UK. Kromek’s CEO Arnab Basu believes Donald Trump’s proposed corporation tax reductions for US manufacturers make America a more attractive investment option, regardless of the recent NI increases
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