Businesses are cutting jobs at the fastest pace in 15 years as budget collapse hurts economy: confidence falls after £25bn NI rise
Service companies shed jobs at the fastest pace in more than 15 years barring the pandemic last month as business confidence fell in the wake of the Budget.
Businesses responded to rising employment costs, including Labour’s £25 billion National Insurance (NI) tax raid, by laying off staff, according to the closely watched monthly Purchasing Managers’ Index ( PMI) survey from S&P Global.
The report added that optimism about growth in the coming year remained at the lowest level in almost two years.
In a separate report on the situation in the euro zone, S&P said the single currency bloc ended 2024 “in a fragile state”, with declining business activity in Germany, France and Italy.
The findings underline the precarious state of the UK and European economies at the start of the new year.
The job losses in Britain are the latest evidence that the NI increases are having a damaging effect on the economy, which has stagnated since Labor took office.
Job losses: Companies have responded to rising labor costs by cutting workers, S&P Global’s closely watched monthly purchasing managers index shows
“A post-Budget decline in business optimism continued in December,” said Tim Moore, chief economics officer at S&P Global.
‘Faced with weak demand and rising labor costs, many service providers have chosen to curtail hiring and postpone the replenishment of positions in December.
“Excluding the pandemic, this represented the steepest job losses in more than fifteen years.”
The vast services sector, which includes everything from hair salons and bars to law firms and accountants, accounts for more than four-fifths of British manufacturing.
According to the PMI survey, sales slowed in December due to “declining customer confidence in the wake of the autumn budget, mainly due to upcoming increases in employers’ national insurance contributions.”
Employment was a “weak spot” for the sector as 2024 drew to a close, the report said. Lower staff numbers have been reported for three months in a row, with the latest reductions being the fastest since January 2021, when Britain was still in the grip of Covid-19. closures.
The survey found that 23 percent of companies reported a decline in headcount in December, almost double the 12 percent who said numbers increased.
Official figures show the UK economy recorded zero growth in the third quarter of 2024 and the Bank of England has predicted it would also stagnate in the fourth quarter.
Separate figures from the British Chambers of Commerce (BCC) show that business confidence has fallen to the lowest level since the 2022 Liz Truss mini-Budget, as businesses become increasingly concerned about taxes – with more than half predicting price rises.
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