Scottish business leaders have warned that a hike to national insurance contributions for companies would be “costly and painful”.

Sir Keir Starmer has been issued a stark warning that hiking national insurance contributions would be “costly and painful” for Scottish businesses - amid fears jobs could be put at risk.

The alarm comes after the Prime Minister refused to rule out an increase to national insurance contributions made by businesses despite pledging not to increase tax on “working people”.

The Chancellor of the Exchequer, Rachel Reeves PIC: Stefan Rousseau/PA Wire

The refusal to rule out such an increase for businesses has fuelled speculation such a lever could be used to help ease the financial stress on the UK when Chancellor Rachel Reeves delivers her first budget on October 30.

The Scottish Chambers of Commerce published a survey of 450 businesses this week, with 55 per cent of them saying they were concerned about taxation - amid Scottish business leaders calling on the UK government to halt any such move to increase national insurance.

Liz Cameron, chief executive of Scottish Chambers of Commerce, said: “Businesses in Scotland would see a rise in their NICs as a costly and painful move for growth and investment.

“Such a move would increase the cost of taking someone on and risks businesses simply being financially unable to hire, retain, and invest in staff.”

She added: “This comes at a time when cost pressures from payroll and other labour costs are already being reported by as high seven in 10 of Scottish firms, according to our latest quarterly survey.

“We urge the government to not add to the list of business costs and instead work with businesses across the UK to reform the skills agenda to address critical talent shortages and support the needs of the economy.”

The SNP has called on Labour ministers to assess the impact such a move could have on firms and their ability to take on workers.

In a letter to the Chancellor, SNP economy spokesman Dave Doogan, said: "The Labour party must tread very carefully if it is planning to hike national insurance taxes on thousands of small and medium-sized Scottish businesses.

"There is a very real danger it could lead to squeezed pay for thousands of Scottish workers, fewer jobs and even redundancies."

He added: "The Labour government must publish a full impact assessment of any national insurance hike on small and medium-sized businesses, and the jobs and pay of millions of workers - and be certain that workers won't lose out if the Labour party goes ahead with this tax rise.

"You must be certain that jobs won't be lost, and the wages of workers won't be squeezed, as a result of Labour's tax hikes."

Scottish Chambers of Commerce vice president, Douglas Smith, said businesses understand the public finances are "challenging", but stressed that any changes at the budget "must not be at the expense of investment and growth".

But the Treasury would not be drawn on the speculation.

A spokesman said: "We do not comment on speculation around tax changes outside of fiscal events."

Prime Minister Sir Keir Starmer PIC: Jonathan Brady/PA Wire

In an interview with the BBC, Sir Keir Starmer warned again that October 30 would bring a "tough" budget amid speculation that Chancellor Rachel Reeves could announce more tax rises than those included in Labour's manifesto.

That manifesto included a promise not to raise taxes on "working people", including income tax, VAT and national insurance.

But the UK government has faced questions on whether the commitment not to raise national insurance covered employers' contributions as well as those by employees.

Yesterday, Sir Keir declined to rule out raising employers' contributions, saying Labour had been "very clear in the manifesto that we wouldn't be increasing tax on working people".

He added: "It wasn't just the manifesto, we said it repeatedly in the campaign and we intend to keep the promises that we made in our manifesto."

Businesses warned that raising their national insurance contributions would operate as a "tax on jobs".

In a political Cabinet meeting yesterday, the Chancellor warned that the UK's decline could not be fixed "in one year or one Budget" but said it would deliver on priorities to "protect working people, fix the NHS and rebuild Britain ".

She insisted it would be an "opportunity to put the country on a firmer footing" and highlighted a £22 billion black hole in the public finances which the government says it was left by its Tory predecessors.

Scottish businesses warn Chancellor over 'costly and painful' national insurance hike

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