UK companies reduced staff in November at the sharpest pace since February, as anxiety over the Budget and weakening business sentiment weighed on hiring decisions, according to new data from S&P Global. The latest purchasing managers’ index (PMI) signalled a renewed loss of momentum across the economy, with firms reporting shrinking headcounts and fading demand.
The composite PMI slipped to 51.2 from 52.2 in October, placing the reading only slightly above the level that separates growth from contraction. November marked the thirteenth month in a row of falling employment, with businesses citing rising payroll taxes, higher wage bills and broader cost pressures as key reasons behind staff cuts.
Survey respondents also noted an abrupt halt in recent improvements in new orders, which had helped support activity earlier in the autumn. Many companies said they were holding back on investment until after the Budget, as mixed signals from the Treasury over potential tax increases created an atmosphere of caution.
Tim Moore, economics director at S&P Global, said the figures showed how concern over government policy had filtered into day-to-day business decisions. “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. He added that many firms were reporting fragile client confidence and heightened risk aversion while waiting for fiscal decisions.
The services PMI, which covers around 650 firms, fell to 51.3. Manufacturing offered a rare lift, with output posting its first positive reading in 14 months and helping prevent the composite index from slipping below 50.
Economists say that weeks of speculation around tax rises kept hiring on hold. Many firms opted to delay recruitment and major capital spending until the fiscal outlook became clearer. Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said: “The Budget did nothing to boost growth prospects, but at least firms now have some clarity over taxes. 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 point to economic growth of about 0.1 per cent for the quarter — a weak expansion but one that avoids a technical recession. Economists say easing inflation pressures in services support expectations that the Bank of England could cut interest rates at its next meeting. Governor Andrew Bailey cast the deciding vote this month to keep rates at 4 per cent but has indicated he wants stronger signs of slowing inflation before shifting policy.
Analysts believe a rate cut early in the new year is likely, offering some relief to companies experiencing the longest period of hiring weakness since the pandemic.
