Services firms slash jobs at fastest rate since 2020 as companies brace for Labour’s tax hikes amid slowdown_Nhy
Service sector firms slashed jobs at the fastest pace since 2020 last month as companies brace for Labour’s tax hikes.
The closely-watched S&P Global UK services PMI showed the economy effectively flatlining last month, with a score of 51. A total standstill would be 50, with anything below that signalling contraction.
A quarter of firms reported that they were shedding jobs, citing rising payroll costs as well as subdued market conditions and geopolitical uncertainty.
It is a fresh headache for Rachel Reeves as she struggles to revive flagging growth and balance the books.
The February score was aboce the 50.8 detected in January, but slightly below the 51.1 pencilled in by analysts.
Companies face growing costs when the minimum wage and employer taxes rise at the start of the new financial year in April.
The closely-watched S&P Global UK services PMI showed the economy effectively flatlining last month, with a score of 51
Labour increased employer national insurance contributions (Nics) in the October Budget insisting a ‘black hole’ in the finances had to be filled.
Tim Moore, economics director at S&P Global Market Intelligence, said services sector firms had seen a ‘clear loss of growth momentum since last autumn’.
He said: ‘Worries about the near-term economic outlook and the impact of rising payroll costs contributed to another slide in business optimism.’
He added: ‘Less upbeat business expectations and another month of sharply rising input prices led to net job shedding across the service economy in February.
‘Employment has now decreased for five months in a row. Aside from the pandemic, this represents the longest period of falling employment since early-2011.’
While about a third of survey respondents said their average costs were still rising, the rate of inflation eased slightly compared with January, amid reports of weaker pricing power.
Thomas Pugh, economist at the consultancy RSM, pointed to ‘weak economic growth in the UK’s major trading partners, such as France, Germany and China’ for falling demand.
But he added that the threat of US tariffs and a global trade war ‘is probably more to blame for a sharp drop in sentiment’.
‘Given recent developments this seems unlikely to change any time soon, meaning net-trade will continue to be a drag on growth.’
It is a fresh headache for Rachel Reeves as she struggles to revive flagging growth and balance the books
