UK businesses slashing staff at fastest rate in years after Budget

The purchasing managers’ index (PMI) survey showed that employment levels fell in December at the fastest rate since 2009 – excluding the Covid-19 pandemic.

A survey of 650 manufacturers and 650 service sector companies blamed a combination of softer demand, higher employment costs and squeezed margins for a reduction in headcount.

“Economic growth momentum has been lost since the robust expansion seen earlier in the year, as businesses and households have responded negatively to the new Labour government’s downbeat rhetoric and policies,” said Chris Williamson, the chief business economist at S&P Global Market Intelligence, which compiles the PMI survey.

“Firms are responding to the increase in national insurance contributions and new regulations around staffing with a marked pull-back in hiring.”

An even clearer picture of the effects of Labour’s Budget on the economy will be addressed in March, when the Office for Budget Responsibility (OBR) is set to publish its next forecast.

Labour chancellor Rachel Reeves has described the £40bn tax rises in the Budget were necessary to repair the battered economy, but it went down like a lead balloon with many business sectors.

Retailers have led business leaders in warning Reeves that the measures announced in her first Budget would inevitably lead to “increased prices and job losses” in the new year.

It comes after official figures showed that Britain’s economy shrank by 0.1% in October.