UK Businesses Cutting Jobs at Fastest Rate in Over Four Years

A new survey has revealed that UK businesses are reducing jobs at the fastest pace since 2020, with upcoming Budget-related cost increases accelerating the trend.

Despite this, private sector activity has grown in February, supported by expansion in the services industry.

According to data from S&P Global, staffing numbers fell at the steepest rate since November 2020, primarily due to rising payroll expenses. Businesses faced mounting wage pressures, increasing overall costs, and weak demand.

The S&P Global flash UK composite purchasing managers’ index (PMI) recorded a slight dip to 50.5 in February, down from January’s 50.6. The index, based on preliminary data, indicates expansion when above 50.0 and contraction when below.

Growth Stalls

Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that February’s early data suggests business activity has remained stagnant for the fourth consecutive month. Job losses have increased due to falling sales and rising costs.

He warned that the combination of sluggish growth and rising inflation signals a stagflationary environment, posing challenges for the Bank of England.

The survey also showed that input cost inflation climbed for the fourth straight month in February, largely due to rising wages and suppliers passing on the impact of higher employer national insurance contributions.

This follows official data revealing that Consumer Prices Index (CPI) inflation rose to 3% in January, surpassing economists’ predictions.

Price Increases and Job Cuts

Williamson highlighted that inflationary pressures are increasing as more firms feel compelled to raise prices to offset rising staff costs linked to the national insurance hike and minimum wage increase announced in the autumn Budget.

However, he also emphasized that these Budget changes are a key factor behind the rising job cuts.

Employment levels fell sharply again in February, marking the most significant decline outside of the pandemic since the global financial crisis.

One in three businesses reporting job reductions attributed them directly to policies introduced in last October’s Budget.