UK companies are cutting jobs at the fastest rate since the first year of the Covid-19 pandemic, a new study has shown.
A poll from data provider S&P shows that the UK economy’s bleak performance has led to companies reassessing costs and. British firms reduced staffing numbers again this month, blaming on “higher payroll costs and weak demand”.
S&P Global also reported that the fall in staffing this month is the sharpest since November 2020, with some companies blaming policies announced in last autumn’s budget (such as the increase in employers’ national insurance contributions from April).
Chris Williamson, chief business economist at S&P Global Market Intelligence, warns that the UK risks falling into a “stagflationary environment”.
He said: “Early PMI survey data for February indicate that business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs.
The lack of growth alongside rising price pressures points to a stagflationary environment which will present a growing dilemma for the Bank of England.
While marginal output growth was eked out in February, order books deteriorated at a rate not seen since August 2023 to hint at likely cuts to business activity in the coming months unless demand revives.
Firms’ costs are meanwhile rising at a rate not witnessed since May 2023, the rate of inflation having now accelerated for four straight months, putting further upward pressure on selling prices for both goods and services. The survey data point to a further rise in inflation beyond the latest uptick to 3%.
“A key factor behind the upturn in inflationary pressures is the growing number of firms reporting the need to raise prices in order to help offset the impending rise in staff costs associated with the National insurance hike and uplift to the minimum wage announced in the autumn Budget.
“However, companies also reported that the Budget changes also played a major role in driving intensifying job cuts. Employment fell sharply again in February, dropping at a rate not seen since the global financial crisis if pandemic months are excluded. One in three companies reporting lower staffing levels directly linked the reduction to policies announced in last October’s Budget.”
