Job losses are mounting as Labour’s gloom damages confidence and fuels fears of a recession
Businesses are cutting jobs at the fastest pace in almost four years as Labour’s “gloomy rhetoric and policies” take their toll.
The closely watched Purchasing Managers’ Index (PMI) report showed the steepest fall in private sector headcount since January 2021, when Britain was still in the grip of Covid lockdowns.
And it showed business optimism fell to its lowest level in two years amid concerns over tax increases announced by Rachel Reeves in the budget.
Chris Williamson, chief business economist at S&P Global Market Intelligence, which compiled the PMI survey, said: “The loss of confidence and increasing job losses suggest worse is yet to come as we head into the new year.”
It is the latest sign that the Chancellor’s £25bn raid on employer National Insurance (NI) is hampering growth.
According to the report, some employers have decided not to replace departing staff due to rising labor costs.
Job losses: Chancellor Rachel Reeves’ £25bn budget raid on employers’ national insurance appears to be hampering growth
Others said the NI changes have prompted them to reduce hours and make longer-term efforts to restructure the workforce.
It also pointed out that imposing a series of new rules on workers’ rights would contribute to the “marked decline in hiring.”
The figures come after a warning last week that the economy was on ‘recession watch’ after official data showed gross domestic product (GDP) fell in October.
This was attributed to companies wavering on their plans in anticipation of the budget, which came at the end of October.
Yet there are signs that activity has deteriorated further after the measures introduced by Reeves turned out to be even worse than feared.
And the Chancellor’s decision to spend tens of billions more on borrowing and spending has created further headaches by further increasing inflationary pressures.
Figures out tomorrow are expected to show inflation has risen to 2.6 percent, which would be the highest since March.
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.
‘Business confidence has sunk to its lowest level in two years as companies weigh tougher revenue prospects against rising costs, particularly for staff due to the changes announced in the Budget.
‘Businesses are responding to increases in national insurance contributions and new workforce regulations with a marked drop in hiring, causing employment to fall at the fastest pace in December since the 2009 global financial crisis, as the pandemic takes hold. consideration is left.’
The PMI survey headline reading of 50.5 – on a scale where the 50 mark separates growth from contraction – was unchanged from November, but worse than expected by economists.
It showed business activity is growing only marginally – and at a much weaker pace than in the first half of the year before Labor came to power.
Consultancy Capital Economics said the data was consistent with a 0.3 percent contraction in GDP in the fourth quarter.
But they noted that the PMI only covers the private sector and does not reflect the increase in government spending.
Separate figures from S&P Global yesterday showed UK consumer confidence slumping to a three-month low as the high cost of living negatively impacts disposable income.
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