Nearly half of all companies are cutting recruitment because of Rachel Reeves‘ hike in National Insurance, research suggests.

A survey of 254 companies representing more than 260,000 employees found that 46 per cent said they would curtail their hiring as a result of the rise – which comes into effect from Sunday.

The Chancellor has hit companies with an increase in the rate which employers pay in contributions from 13.8 per cent to 15 per cent, adding £25 billion to the amount they pay in tax and helping to push many struggling companies closer to insolvency.

The NI hike, revealed in last October’s Budget, has piled the pressure on firms who are also facing higher minimum wages and business rates, as well as the cost of adapting to new workers’ rights.

The survey, by recruitment company Reed, found many companies reporting that they had already postponed or stopped recruitment.

Almost two thirds of respondents said they were concerned about the upcoming changes to NI contributions. On average, they estimated their annual profits would decrease by 29 per cent after it had been implemented.

The increase to NI contributions is also causing 16 per cent of businesses to start making redundancies.

Some 19 per cent also said they were postponing or cancelling salary reviews. In addition, 22 per cent said they were having to make budget cuts in certain departments as a result of the changes.

London has been particularly hard hit, with 60 per cent saying it is impacting their hiring decisions, compared with 38 per cent of firms from outside London.

And 24 per cent of businesses from London said they were already making redundancies in response to the NI increase, versus 12 per cent in the rest of the country. The rise in the national minimum wage this month, from £11.44 an hour to £12.21 for everyone employed aged 21 and over, has also hit recruitment, with 26 per cent saying they had paused hiring and 35 per cent saying it had significantly affected their ability to hire.

James Reed, chairman and CEO of the Reed Group, said: ‘Everyone understands there are difficult decisions to be made given the state of the public finances, but we warned when the increase in employers’ National Insurance was announced it was a tax on jobs and so it has proved.

‘The findings of our survey clearly demonstrate the impact and suggest the jobs market will remain under pressure. The hole this tax increase has made in a million company balance sheets is regrettable.

‘These are tough times for companies that want to hire and expand and this will feed through into weaker economic growth.’