British firms cut jobs at the sharpest pace in four years during December, following the Chancellor’s budget measures that increased employment costs and dampened business confidence. The rate of job losses, excluding pandemic-related cuts, reached its highest level in more than 15 years, with approximately 25% of companies reducing staff numbers and implementing recruitment freezes.
The S&P Global final composite purchasing managers’ index (PMI) marginally decreased to 50.4 from 50.5 in November, marking the lowest reading since October 2023. Though remaining above the crucial 50-point growth threshold, this figure fell short of analysts’ projections.
Tax increases announced by Chancellor Rachel Reeves have triggered a significant decline in job vacancies and business optimism, raising concerns about economic stagnation in late 2023. The Bank of England has revised its Q4 GDP growth forecast to 0%, though economists anticipate stronger growth in early 2024 as increased government spending takes effect and interest rates potentially decrease from 4.75%.
The services sector demonstrated particular vulnerability, with firms raising prices at the fastest rate in six months due to escalating salary costs and raw material expenses. Services inflation remained steady at 5%, while headline consumer price inflation rose to 2.6% in November from 2.3%.
European Union demand weakened, leading to the first decline in UK service sector exports since September 2023, although US demand showed improvement. Business sentiment in the services sector reached its joint lowest level in nearly two years, reflecting widespread uncertainty about economic conditions.
KPMG economists project growth to more than double to 1.7% in 2025, offering a glimmer of hope amid current challenges. The pound responded positively to the PMI data, climbing 0.39% against the dollar to $1.246, while the FTSE 100 recovered from early losses to close 0.3% higher at 8,249.66.
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