British companies cut staff at the fastest pace in nine months in November, as budget uncertainty and weak customer confidence triggered a fresh slowdown in the broader economy, according to new data from S&P Global.
The latest Purchasing Managers’ Index (PMI) showed economic growth stalled during the month, with the overall reading falling to 51.2 from 52.2 in October – just slightly above the 50 threshold that separates expansion from contraction. The number of employees fell by the most since February, marking the thirteenth consecutive month of declines.
Respondents cited higher labor costs, rising taxes and rapidly rising wages as the main reasons for the workforce cuts. Companies also reported an “abrupt end” to the recent improvement in new orders, while overall optimism faded as companies scaled back investment plans.
Tim Moore, economic director at S&P Global, said the results reflected the impact of corporate caution during weeks of intense speculation about tax hikes and spending cuts.
“Lower workloads led to a renewed slowdown in business growth across the UK services economy, with recent expansion much weaker than the post-pandemic trend,” he said. “Survey respondents provided extensive commentary on the business challenges associated with weak customer confidence, increased risk aversion and heightened political uncertainty ahead of the Budget.”
The PMI for the services sector – which includes around 650 companies – fell to 51.3, while manufacturing output offered a rare bright spot, posting a positive reading for the first time in 14 months, helping to support the overall reading.
Economists argue that weeks of conflicting Treasury Department briefings about potential tax hikes kept the economy in a holding pattern as companies paused hiring and delayed major capital spending until after the budget was released.
“The Budget has not improved the growth outlook, but at least businesses now have some clarity on taxes,” said Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics. “The employment record continues to point to downside risks to the labor market, but we expect GDP growth to pick up somewhat following the passage of the budget.”
The PMI readings for October and November suggest quarterly GDP growth of around 0.1 percent – still weak but without recession.
Jordan-Doak added that easing price pressures in the services sector bolstered expectations that the Bank of England was now “all but committed” to cutting interest rates at its next meeting. Gov. Andrew Bailey voted decisively this month to keep interest rates at 4 percent but has signaled he wants clearer evidence of slowing inflation before easing policy.
With job vacancies rising and inflation easing due to some measures, analysts expect the bank to ease policy early in the new year, providing some relief to companies facing the longest hiring slump since the pandemic.
