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UK workers are on high alert for job cuts this year as higher taxes announced in the Chancellor’s first budget hit businesses from April. Meanwhile, negative economic growth in January has sparked recession fears.
Almost three-fifths of UK employees feel their chance of redundancy is higher this year, compared to 2024, according to a survey by career advice company LiveCareer, and their fears are not unfounded.
Firms that rely heavily on labour are particularly vulnerable to rising staff costs and, as April inches closer, many companies may be considering redundancies to manage their overheads. British supermarkets Sainsbury’s, Tesco and Morrisons all cut headcount in the first quarter of 2025, and more firms are expected to follow suit.
With an escalating global trade war, higher inflation and higher interest rates looking more likely, business activity and investment are paralysed by economic uncertainty. Under these conditions, firms are reluctant to hire extra pairs of hands.
While an uprating of the National Living Wage was expected this Spring, the shock increase in employers’ NICs poses a real threat to employment. Research by the Chartered Institute for Professional Development (CIPD) identified a trend for businesses planning on reducing headcount to cope with higher wage bills.
As higher taxes threaten their profit margins, employers are also rethinking how generous they can be with pension contributions and other benefits. Retail giant John Lewis has already scrapped its annual staff bonus for the third year in a row.
Even if your job is safe, planning how you can meet your financial obligations if you lost your income is a smart move – for your money and your mental health.
Below, two personal finance experts share their wisdom on how to keep calm and bolster your financial backup plan.
Step One: Scrutinise your budget
Managing your money with confidence starts with knowing how much your essential outgoings add up to. Rent or mortgage payments, bills and groceries usually fall into this category, but it’s sensible to factor in fuel, public transport, and childcare costs too. If you’ve never done a budget before you can try our step-by-step guide to budgeting.
We all categorise our “wants” and “needs” differently; what feels essential to one person might feel less important to another. Conducting a detailed analysis of your monthly expenditure lets you highlight non-essential spending that could be cut from your budget if you needed to.
“The more you know where your money goes, the quicker you’re able to react if you’ve got a financial situation such as redundancy,” says Matt Beck, an independent financial advisor at Chase de Vere.
Beck told NerdWallet that many consumers need to be made aware of redundancy clauses in contracts such as gym memberships. “You’d be surprised how many [gym] contracts you can potentially end on quick notice if you have been made redundant,” he says. To understand your rights when it comes to cancelling services, you can visit the Citizens Advice website.
Step Two: Get debts under control
Clearing expensive debts (such as high-interest credit cards) can increase your financial security, making it easier to weather stormy economic conditions which could turn into a recession.. “If you’ve got the threat of impending redundancy, look at what debts you might have, because those should probably be paid off as quickly as possible,” suggests Octopus Money Coach Emma Gosling.
Whilst paying down borrowing may increase your outgoings in the short term, consolidating debts while you still have a regular income could save you stress later on. “Having debt and then being made unemployed makes it trickier for you to get good repayment deals in the future,” Gosling explains.
Homeowners worried about how they’ll manage their mortgage payments while unemployed should check if they have any protection in place, such as mortgage payment protection insurance. They can also speak to their lender about any support it can offer.
However, asking your lender for a payment holiday would generally be a last resort, as any gap in payments may be marked on your credit file. “In an ideal world, you’d keep maintaining those payments because it will impact your credit score and ability to borrow,” says Beck.
If you’re fortunate to have savings pots that you can dip into to cover your mortgage, it’s worth seeking professional advice before draining them, he adds.
Step Three: Build your emergency fund
Your emergency fund is a crucial part of your redundancy survival pack. But, putting money aside for unexpected circumstances is something not enough people prioritise.
“Regardless of whether we’re thinking about redundancy or any financial difficulty, whether that’s ill health or the boiler blowing up, having an emergency fund is really important,” Beck says.
He and Gosling both recommend saving three to six months of essential outgoings to ensure you can continue to meet your financial responsibilities. It’s best to keep this in a separate bank account where you’re not likely to touch it, Gosling explains.
>> MORE: 9 Habits of Successful Savers
Step Four: Get the facts (and claim what you can)
Some employees who are made redundant are entitled to be paid during their notice period. However, the length of your notice period may depend on your employment contract and how long you’ve worked at the company. If your job is not currently at risk but rumours of job cuts are rumbling through your workplace, it may be worth digging out your employment contract or speaking to HR to find out what your redundancy notice period would be.
If you’ve worked for your employer for two years or more, you’re entitled to statutory redundancy pay, which can help tide you over while you look for a new job.
Whilst some employers will offer more than this, the government’s statutory redundancy calculator enables you to work out the bare minimum you should receive, so you can manage your finances accordingly.
You can also use the benefits calculator on the gov.uk website to check your entitlement to benefits such as Universal Credit and the new style Jobseeker’s Allowance (JSA).
Should you feel you’ve been made redundant unfairly, Citizens Advice and ACAS can offer guidance. Families can also contact Pregnant Then Screwed, a charity that supports pre and postnatal women with employment issues, and parents who need flexible working.
Reminder: Don’t make decisions you can’t undo
Even with several months’ paid notice, being made redundant can leave a dent in our self-esteem and make rational decision-making harder. Worrying about money can harm your money management, according to our experts.
If you’re due a large severance payout from your employer, it may be tempting to use that cash to pay down a large chunk of your mortgage, put a lump sum into your pension, or pass on some money to family members. However, Beck cautions against making such moves until you’re settled in a new job. “Don’t make those big decisions that you can’t unwind,” wait until you’re “through your probation period and have a bit more security,” he says.
The news that the economy shrank in January will do little to reassure companies or their staff. But, taking proactive steps to improve financial resilience can minimise stress while helping to protect your financial future.
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