UK businesses cut jobs at ‘fastest pace since 2009’ bar the pandemic

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UK businesses are cutting jobs at the fastest pace since the financial crisis, barring the pandemic, as rising spending reignited fears of stagflation in the British economy earlier in the year, according to a closely watched survey.

The S&P Global Flash Purchasing Managers’ Survey on Friday indicated that job loss rates in January and December outside the onset of Covid-19 in 2020 were the highest since the global financial crisis in 2009.

The survey also indicated that the cost burden on businesses has risen at the fastest pace in over a year and a half. Many businesses pass on higher costs to consumers resulting in the fastest increase in average prices charged since July 2023.

Chris Williamson, economist at S&P Global Market Intelligence, said the survey results “increased gloom over the UK economy, with companies cutting jobs amid falling sales and concerns about business prospects”.

That is what he warned Inflationary pressure “Resurfaced, pointing to a stagnant environment that creates increasing policy confusion for the Bank of England”.

According to the survey, lower employment was attributed to frozen hiring and non-replacement of voluntary leavers in the face of rising payroll costs.

Many businesses have suggested the Labor government’s decision to increase employers’ national insurance, which will come into effect in April, has led to cutbacks in hiring plans, while others have cited the impact of the post-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 to 50 points. Any reading above the 50 mark indicates that most businesses are reporting increased activity.

Elias Hilmer, economist at Capital Economics, said Friday’s PMI figures “will not allay the Bank of England’s concerns about weakening activity, but further strengthening of price pressures suggests it will gradually cut rates.”

In line with markets, he expects the Bank of England to cut rates by a quarter point to 4.5 percent in February.

The UK economy registered no growth in the three months to September, marking a sharp slowdown from 0.4 per cent in the previous quarter. The BoE also expects no hike in the last quarter of 2024.