Firms cut jobs at fastest rate in 15 years as budget raid hurts economy – confidence sinks after £25bn rise in IN

Service firms cut jobs last month at the fastest pace in more than 15 years outside the pandemic, as business confidence plummeted in the wake of the Budget.

Businesses responded to the rising cost of employment, including Labour’s £25 billion tax raid on National Insurance (NI), by laying off staff, according to S&P Global’s monthly Purchasing Managers’ Index (PMI) survey. very closely followed.

The report added that optimism about growth in the coming year remained at the lowest level in almost two years.

In a separate report on the situation in the eurozone, S&P said the single currency bloc ended 2024 “in a fragile state” with business activity slowing in Germany, France and Italy.

The findings underline the precarious state of the UK and European economies at the start of the New Year.

Britain’s job cuts are the latest evidence that NI increases are having a detrimental impact on the economy, which has stagnated since Labor took power.

“A decline in post-Budget business optimism persisted in December,” said Tim Moore, chief economic officer at S&P Global.

‘Faced with subdued demand conditions and rising labor costs, many service providers opted to reduce staff hiring and delay replacement of positions in December.

“Excluding the pandemic, this represented the steepest pace of job destruction in more than 15 years.”

The growing services sector, which ranges from hairdressers and bars to law firms and accountants, accounts for more than four-fifths of UK output.

According to the PMI survey, sales slowed in December amid “falling confidence among customers following the autumn budget, especially due to upcoming increases in employers’ National Insurance contributions”.

Employment was a “weak point” for the sector as 2024 drew to a close, the report added, with staff numbers lower for three consecutive months and the latest reduction the fastest since January 2021, when Britain was still in the grip of Covid. locks.

The survey found that 23 percent of companies reported a drop in workforce levels in December, almost double the 12 percent who said numbers rose.

Official figures show the UK economy recorded zero growth in the third quarter of 2024 and the Bank of England forecast it would also stagnate in the fourth quarter.

Separate figures from the British Chambers of Commerce (BCC) showed business confidence fell to the lowest level since Liz Truss’ mini-Budget in 2022, as businesses become increasingly worried about taxes, with more than half predicting price increases.