A report by S&P Global Flash paints a grim picture of the UK economy, with employment levels dropping for the fourth straight month. Employers are struggling with the impact of Chancellor Rachel Reeves’s recent budget, which has increased the cost of doing business.
The S&P Global Flash UK purchasing managers index (PMI) shows a consistent decline in staffing since October 2024, when the budget was introduced. Chris Williamson, chief business economist at S&P Global, stated, “The first signs of 2025 are worrying.
Companies are cutting jobs due to falling sales and a lack of confidence in the future. The sharp rise in staff costs caused by the budget has made things worse. Apart from the pandemic, job losses are now at the highest rate since the 2009 financial crisis.”
Elliott Jordan-Doak from Pantheon Macroeconomics highlighted that the Bank of England faces challenges. While growth is slowing, rising prices make it hard to fully respond. Companies are passing payroll tax increases onto consumers while cutting jobs. “The Bank must balance growth to control inflation without severely damaging the economy,” he said.
The October Budget raised the national living wage, increased national insurance contributions, and lowered the threshold for payments, which has hit businesses hard. Many companies are now in “critical” financial distress, according to Begbies Traynor analysts. The firm reported a sharp rise in struggling businesses across the UK in late 2024.
Ric Traynor, executive chairman of Begbies Traynor, commented, “Many businesses, especially in retail and hospitality, are on the brink. They were already dealing with low consumer confidence and higher borrowing costs. The added costs from the budget could push them over the edge.”
The Chancellor’s budget has been widely criticized for hindering economic growth, leaving many businesses and workers uncertain about the future.
