British corporate profits just hit their lowest level since the financial crisis
UK corporate profits have fallen to their lowest level as a share of GDP since before the 2008 financial crisis, according to new analysis from the Confederation of British Industry (CBI).
CBI Chief Economist Louise Hellem highlighted the growing “wedge” between what employees take home and the total cost of employment to businesses. She pointed to surging employer costs – including hikes in National Insurance Contributions (NICs), National Living Wage increases, and obligations under the Employment Rights Act – as key drivers squeezing profitability.
“Corporate profits in the UK are now at their lowest level since before the financial crisis (as a proportion of GDP),” Hellem wrote, citing Office for National Statistics (ONS) data adjusted by CBI calculations.
The measure uses Gross Operating Surplus – profits before taxes, interest, and depreciation – which has been eroded by rising employment expenses and other input costs like energy and commodities.
The briefing estimates that employer NICs alone will add more than £17 billion to private sector labour costs this year, pushing total annual employment costs beyond £100 billion.
Combined with mandatory pension contributions and wage growth, “total compensation per employee” has continued to climb even as productivity growth has flatlined and real wages have struggled to recover fully from post-pandemic and inflation pressures.
This squeeze comes at a time when UK businesses are already facing fragile demand, elevated economic uncertainty, and weak investment appetite.
Hiring intentions have remained negative for 18 consecutive months, and business investment plans are at their weakest since the COVID era, per CBI surveys. Unemployment has risen to a five-year high, with youth unemployment now exceeding the EU average for the first time on record.
Hellem argued that these dynamics are self-reinforcing: lower profits limit companies’ ability to invest in technology, machinery, and training that could boost productivity, create jobs, and support sustainable pay rises.
“When businesses are squeezed, funding for investment – which drives productivity, job creation, and sustainable pay rises – is reduced,” she noted.
Looking ahead, the CBI called for policy adjustments to relieve the pressure, including reconsidering National Living Wage uplifts for younger workers, pragmatic rollout of the Employment Rights Act, and better use of the Growth and Skills Levy to fund training and upskilling.
The warning arrives amid broader concerns about the UK economy’s trajectory under the current government.
Recent CBI forecasts and surveys have repeatedly flagged high labour costs, from NICs hikes and minimum wage rises, as a drag on profits, hiring, and investment. While some sectors have seen temporary boosts from government spending, underlying weaknesses persist.
