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UK businesses are cutting jobs at the fastest pace since the financial crisis, despite the pandemic, as rising costs dominated fears of the British economy at the start of the year, according to a closely watched survey.
A survey of S&P Global purchasing managers on Friday showed that the rate of job losses in January and December was the highest since the global financial crisis in 2009, excluding the start of Covid-19 in 2020.
Research has shown that the cost burdens in the industry have increased at a rapid rate in more than a year and a half. Many businesses have passed on higher costs to consumers resulting in a sharp increase in the average price charged from July 2023.
Chris Williamson, chief economist at S&P Global Market Intelligence, said the survey results “add to the gloom for the UK economy, with companies cutting employment amid falling sales and concerns about business prospects”.
He warned that inflationary pressure has “ruled, pointing to an inflationary environment that is setting the Bank of England's expansionary policy”.
Low employment was linked to the hiring of tour guides and non-replacement of those who left voluntarily after rising wage costs, according to the study.
Many businesses have suggested the Labor government's decision to increase employers' national insurance, which comes into effect in April, has had the effect of cutting recruitment plans, while others have cited the impact of the budget slump on business confidence.
The headline S&P Global flash UK PMI composite output index, which tracks overall activity in the private sector, rose to a three-month high of 50.9 points in January from 50.4 in December.
Economists polled by Reuters had expected the index to fall slightly below 50 points. Any reading above 50 points indicates that many businesses are reporting job growth.
Elias Hilmer, an economist at Capital Economics, said Friday's PMI numbers “will not ease the Bank of England's concerns about job weakness, but further strengthening of price pressures suggests it will lower prices gradually thereafter.”
To align with the markets, he expects the Bank of England to cut rates quarterly to 4.5 percent in February.
The UK economy registered no growth in the three months to September, marking a sharp drop from 0.4 per cent in the previous quarter. The BoE expects no growth again in the last quarter of 2024.