The private sector in Great Britain has experienced its first contraction in 12 months, with businesses pointing directly to tax increases announced in Labour’s inaugural budget. The downturn, coupled with declining retail sales, signals mounting economic pressures across the nation.
S&P Global Market Intelligence’s latest survey reveals the purchasing managers’ index dropped from 51.8 to 49.9 in November, marking a significant shift into contractionary territory. Manufacturing sectors recorded substantial declines in new orders, reaching their lowest levels since February.
October’s retail performance painted an equally concerning picture, with sales volumes falling 0.7% month-on-month. The Office for National Statistics highlighted particular weakness in clothing and footwear stores, which witnessed a sharp 3.1% decline. This decline occurred during what should have been the start of the crucial ‘golden quarter’ for retailers.
Chancellor Rachel Reeves’s budget decisions, especially the increase in employers’ national insurance contributions, have drawn criticism from the business community. Retailers estimate these changes will add £7 billion to their operational costs, potentially hampering future growth prospects.
The pound sterling responded negatively to these developments, touching a six-month low against the US dollar at $1.255. This currency weakness reflects growing concerns about Britain’s economic trajectory and the impact of recent policy changes.
Despite these challenges, quarterly figures show some resilience, with sales volumes rising 0.8% in the three months to October compared to the previous quarter. Year-on-year figures indicate a 2.4% increase, suggesting underlying economic strength despite immediate pressures.
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