Data shows job losses are increasing at the fastest pace in four years

The layoff rate has reached its highest level in almost four years in the wake of Chancellor Rachel Reeves’ fall budget, new data shows.

The closely watched S&P Global Flash Composite Purchasing Managers’ Index shows that companies this month cut jobs at the fastest pace since the Covid-19 lockdowns in January 2021.

Excluding the pandemic, UK employment fell at the fastest pace since the 2008/2009 global financial crisis.

S&P Global blamed the decline on the “gloomy outlook” following the tax hikes announced in the recent budget and the “broader direction of government policy” in the coming months.

Chancellor Rachel Reeves announced on October 30 that employers will pay a 15 per cent national insurance rate on staff salaries above £5,000 from April, instead of the current 13.8 per cent levy on wages above £9,100.

At the same time, the national living wage will rise by 6.7 per cent to £12.21 per hour and the minimum hourly wage for 18 to 20 year olds will rise by 16.3 per cent to £10.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said many companies are responding to these policies with a “market pullback” in hiring, especially within the leisure and financial services sectors.

S&P said service providers have suffered a “particularly steep” decline in hiring, largely because they have not replaced people who quit voluntarily.

Other companies have either reduced working hours or drawn up longer-term plans to restructure their workforces.

Williamson also said proposed new regulations were to blame for companies’ reluctance to hire more staff.

Labour’s employment rights bill would strengthen worker protections but could cost companies £5 billion a year, according to the government’s own analysis.

Proposed measures in the bill include a ban on zero-hour contracts, a right to bereavement leave and a standard right to flexible working from day one.

S&P Global also revealed that industrial production contracted for the second month in a row in December and at the fastest pace for eleven months, at 45.7 compared to 48.3 in November. Any number below 50 indicates a contraction.

According to the report, goods manufacturers were hit by customer destocking and lower demand from Europe, resulting in the fastest decline in total export sales in 14 months.

In addition, manufacturers reported the largest increase in input prices since early 2023, with anecdotal evidence pointing to higher transportation costs and raw material prices.

Williamson said: ‘Businesses are reporting a triple dose of bleak news as 2024 draws to a close, with economic growth stalled, employment slumping and inflation rising again.

“Economic growth momentum has been lost since the robust expansion earlier this year as businesses and households have reacted negatively to the new Labor government’s gloomy rhetoric and policies.”

However, the decline in goods production was offset by a modest rebound in service sector activity, leaving the Flash UK PMI Composite Output Index stable at 50.5.

The figures from S&P Global come three days after the Office for National Statistics said the UK economy shrank for a second consecutive month in October.