UK firms lose more momentum and cut staff in December in wake of budget, PMI shows
2025.01.06 06:14
By Andy Bruce
(Reuters) – British business activity growth slowed to a crawl in December and employers cut staffing at the fastest rate in almost four years as a slump in corporate morale after the government’s budget rumbled on, a survey showed on Monday.
The final reading of the UK S&P Composite Purchasing Managers’ Index (PMI) inched down to 50.4 from 50.5 in November – its lowest since October 2023 and barely above the 50 dividing line between growth and contraction and down from a preliminary reading of 50.5.
The survey adds to a run of lacklustre economic indicators since finance minister Rachel Reeves’ Oct. 30 budget, which imposed large tax increases on businesses to help fund more public spending and investment.
Britain’s economy stagnated in the three months to September and the BoE estimated last month that it was continuing to flatline in the fourth quarter – a forecast that Monday’s PMI is likely to support.
“A post-Budget slump in business optimism persisted in December, with output growth expectations for the year ahead unchanged from November’s 23-month low,” said Tim Moore, economics director at S&P Global Market Intelligence.
Businesses shed jobs at the fastest rate since January 2021, when a COVID-19 lockdown was in force.
S&P Global said companies that had cut staffing in December “overwhelmingly” cited rising costs, in particular due the upcoming increase in employer social insurance contributions announced in the budget, which will come into force in April.
Business groups have sharply criticised the budget, although many economists think increased government spending will temporarily boost the economy over 2025.
The PMI’s gauge of future output fell to its lowest level since December 2022 – not long after the “mini-budget” of former prime minister Liz Truss – while costs faced by businesses increased at the fastest pace since April.
“Nearly one-in-four survey respondents saw an overall decline in their payroll numbers. Excluding the pandemic, this represented the steepest pace of job shedding for more than 15 years,” Moore said.
S&P Global revised down December’s services PMI – which forms part of the composite reading along with manufacturing – to 51.1 from 51.4.
Last week the manufacturing PMI was revised down to an 11-month low of 47.0 for December from an initial reading of 47.3.
