UK businesses are cutting jobs at the fastest rate since November 2020, driven by rising payroll costs and weak demand, according to a new survey from S&P Global. The flash UK composite purchasing managers’ index (PMI) for February stood at 50.5, down slightly from 50.6 in January, indicating that business activity remained largely stagnant for a fourth consecutive month.
The survey found that staffing levels fell sharply in February, with one in three companies reporting lower staffing directly linked to policies announced in last October’s Budget, including increases to employer national insurance contributions and the minimum wage. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the data points to a “stagflationary environment” that will challenge the Bank of England.
Input cost inflation rose for the fourth month in a row, with businesses citing higher salary payments and suppliers passing on upcoming national insurance hikes. This follows official figures showing CPI inflation rose to 3% in January, above expectations. Williamson noted that firms are raising prices to offset higher staff costs, while the Budget changes are “intensifying” job cuts.
The decline in employment was described as the sharpest since the global financial crisis, excluding pandemic months. Despite the job losses, overall private sector activity was propped up by growth in the services industry, though manufacturing continued to struggle.
