UK firms cut staffing by most in almost four years
Newsflash: UK companies are cutting jobs at the fastest rate since early in the Covid-19 pandemic, a new survey of British purchasing managers shows.
S&P Global’s latest flash PMI report, just released, shows that staffing numbers are falling in December, for the third month in a row, as firms react to October’s tax-raising budget.
The rate of job shedding across the private sector economy was the fastest for almost four years, led by services companies.
Firms are choosing not to replace voluntary leavers due to rising employment costs, the report says, such as forthcoming increases in employers’ National Insurance contributions and the minimum wage.
The increase in employers’ NICs rates is also leading to cutbacks to working hours and longer-term efforts to restructure workforces, S&P Global says
The PMI report shows that there was marginal growth across the private sector this month; its Composite Output Index was unchanged at 50.5, just over the 50-point mark showing stagnation.
But while the services sector grew, there was another contraction in manufacturing.
Worryingly, business optimism fell to the lowest level since December 2022, largely due to an ongoing slide in service sector confidence.
Chris Williamson, chief business economist at S&P Global Market Intelligence says:
“Businesses are reporting a triple whammy of gloomy news as 2024 comes to a close, with economic growth stalled, employment slumping and inflation back on the rise.
“Economic growth momentum has been lost since the robust expansion seen earlier in the year, as businesses and households have responded negatively to the new Labour government’s downbeat rhetoric and policies. Business confidence has sunk to a two-year low as companies weigh up a tougher outlook for sales alongside rising costs, notably for staff as a result of changes announced in the Budget. The survey’s price gauges are indicating that inflation is turning higher again.
“Firms are responding to the increase in National Insurance contributions and new regulations around staffing with a marked pull-back in hiring, causing employment to fall in December at the fastest rate since the global financial crisis in 2009 if the pandemic is excluded.
“While the December PMI is indicative of the economy more or less stalled in the fourth quarter, the loss of confidence and increased culling of jobs hints at worse to come as we head into the new year. Policymakers at the Bank of England may be cautious about cutting interest rates, however, given the resurgence of inflation being signalled, adding further to downturn risks in 2025.”