Shake-up of NICs could drive engineers abroad

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The Independent Online
ENGINEERING companies are seriously considering leaving the country because of the Government's shake-up of National Insurance, announced in the Budget on Tuesday.

The Engineering Employers Federation said the increase in employers' National Insurance contributions (NICs) - which will rise from 10 to 12.2 per cent on all pay above pounds 210 a week - had prompted some members to consider moving elsewhere.

One well-known company, which did not wish to be named, has already warned Martin Taylor, the Barclays chief executive who is conducting a review of tax and benefits, that it might leave the country if his proposals were implemented.

The proposals for reform of NICs came in a report by Mr Taylor, published on the same day as the Budget, and will be implemented in April next year.

Under the Budget a progressive system of employers' contributions, rising in steps from 3 per cent at pounds 61 to 10 per cent at pounds 210, will be replaced by a single rate of 12.2 per cent on earnings above pounds 81 a week.

While low-paying employers will pay less for most employees paid less than pounds 450 a week, those paying higher wages will pay more. Wages of pounds 800 a week - common in the hi-tech engineering sector - would incur an extra pounds 7.84 in NICs.

David Yeandle, head of employment affairs at the EEF, said: "We see this predominantly as a bad thing for our sector. If it's going to be revenue- neutral for the Chancellor it is not going to be cost-neutral for the hi-tech industry. It is particularly difficult for those employing lots of high-paid people.

"I haven't seen anything to justify that this would provide more jobs. It is unlikely to create any new jobs in the engineering sector. We don't believe that companies make decisions about taking people on because of these relatively marginal effects."

The engineers said there was too little time to consult on the proposals, which were first revealed in February in an informal consultation by Mr Taylor.

The CBI has also warned that the effects on high-paying employers will be to impose an additional burden at a time when exports are already being squeezed by the strong pound.