Good afternoon. This is your midday market update from City AM.
It is now midway through October and the event we’ve all been waiting for is fast approaching. Certain to pack plenty of jumpscares, uncover some skeletons cowering in the closet and deliver some sweet sugary handouts, Halloween is now only two weekends away. Oh, and there’s the Budget too.
The UK’s business groups and think tanks are getting into the spooky mood, lurking around every corner with spine-chilling warnings of a £12bn hit to his headroom (boo!) and a £35bn spending shortfall (aah!).
While the biggest skeletons in Labour’s closet are their huge spending bill and sky-high borrowing costs, pressure is mounting on the Chancellor that he must bust another ghost this Halloween: the UK’s youth unemployment crisis.
About 981,000 under-25s are currently not in education, employment or training (Neet), according to the Office for National Statistics. Following former health secretary Alan Milburn’s findings that social media and the welfare state are keeping young people out of work, businesses are putting pressure on Labour to make it cheaper for them to hire.
Healey is drawing up measures to slash the cost of hiring under-25-year-olds at the Budget, our lobby supremo Maurício Alencar revealed overnight. This could include extending national insurance contributions relief or offering a tax holiday to employers after they hire a young person.
The Chancellor appears to finally be rolling up his sleeves and getting into the Neety gritty issues, in what would be a welcome boost for the industries across the UK economy, particularly for retail and hospitality.
Bosses say they simply can’t afford to hire. Much of this blame lays at the foot of Healey predecessor Rachel Reeves, they say, who hiked the rate and threshold of employer national insurance contributions (NICs) in her first Budget.
Industry chiefs have also hit out at the government’s plans to crack down on flexible working and repeated above-inflation increases to the national living wage. High street bosses met Healey yesterday to reiterate the need to slash employment costs, and a person close to the meeting said they felt the Chancellor was listening.
But we should never underestimate this government’s penchant for kicking the can down the road. Last week, it was confirmed that Milburn’s full review will not be published until November at the earliest, to prevent these - likely chilling - revelations from overshadowing the Budget.
Though business leaders are hoping Milburn’s preliminary review will have served up enough food for thought for the government to cut the cost of employment this month, bosses will be worried that the fundamental issues set to be laid out in this report may be left unaddressed.
“My suspicion is they’re going to try and palm off as much of that stuff in the future as they possibly can,” one retail industry source said. This Halloween will be the last trick-or-treat run for many Neets, if Labour succeeds in getting them back into work, but the Treasury may be left with some skeletons still in its closet.
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