UK businesses cut staff at the quickest pace in nine months in November, as uncertainty ahead of the Budget and fragile client confidence triggered a renewed slowdown across the economy, according to new data from S&P Global.
The latest purchasing managers’ index (PMI) showed that economic growth stalled over the month, with the composite reading slipping to 51.2 from 52.2 in October — only marginally above the 50 threshold separating expansion from contraction. Workforce numbers declined at the steepest rate since February, marking the thirteenth consecutive month of falling headcounts.
Respondents to the survey pointed to higher payroll costs, rising taxes and fast-increasing wages as key reasons for reducing staff levels. Firms also reported an “abrupt end” to the recent improvement in new orders, while overall optimism softened as companies scaled back investment plans.
Tim Moore, economics director at S&P Global, said the findings reflected the impact of business caution during weeks of intense speculation over tax rises and spending cuts.
“Lower workloads led to a renewed slowdown in business activity growth across the UK service economy, with the latest expansion much softer than the post-pandemic trend,” he said. “Survey respondents widely commented on business challenges linked to fragile client confidence, heightened risk aversion and elevated policy uncertainty in the run-up to the Budget.”
The services PMI — covering around 650 companies — slipped to 51.3, while manufacturing output offered a rare bright spot, posting its first positive reading in 14 months and helping to prop up the overall figure.
Economists argue that weeks of conflicting Treasury briefings on potential tax rises kept the economy in a holding pattern, as businesses paused hiring and delayed major capital spending until after the Budget.
“The Budget did nothing to boost growth prospects, but at least firms now have some clarity over taxes,” said Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics. “The employment balance continues to suggest downside risks to the job market, but we expect GDP growth to pick up a little now that the Budget has passed.”
The PMI readings for October and November imply quarterly GDP growth of around 0.1 per cent — still weak, but avoiding recession.
Jordan-Doak added that softening price pressures in the services sector bolstered expectations that the Bank of England is now “pretty much locked in” to cut interest rates at its next meeting. Governor Andrew Bailey cast the deciding vote this month to hold rates at 4 per cent, but has signalled he wants clearer evidence of slowing inflation before loosening policy.
With vacancies rising on some measures and inflation easing, analysts expect the Bank to loosen policy early in the new year, offering some relief to businesses facing the most protracted hiring slump since the pandemic.
