Private sector employment in the UK fell at its fastest pace since 2021
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Private sector employment in the UK fell at its fastest pace in nearly four years in December, according to a closely watched survey, indicating that companies pulled back on hiring after Rachel Reeves’ tax increase budget.
S&P Global flash UK purchasing managers’ hire workers The index, a sub-index of the monthly PMI, fell to 45.8 in December, down from 48.9 the previous month and its lowest since January 2021.
It was well below the 50 mark, suggesting the majority of businesses reported lower headcount.
Chris Williamson, chief economist at S&P Global Market Intelligence, said: “Firms are responding to increases in national insurance contributions and new HR rules with a marked fall in recruitment, causing Employment fell in December at the fastest pace since the global crisis. 2009 financial crisis if the pandemic is excluded.”
In her fall BudgetAfter increasing taxes by £40bn, the chancellor has announced employers’ national insurance contributions will increase by £25bn from April 2025.
Businesses will start paying NICs on employees’ earnings from £5,000, instead of the current £9,100 threshold, and the rate will increase by 1.2 percentage points to 15%.
Reeves has defended the policy but critics accuse her of undermining business confidence and many companies say it will affect hiring and could lead to higher prices.
The survey also showed business confidence fell to a two-year low in December as companies weighed the tougher outlook for sales alongside rising costs, especially for staff due to changes announced in the Budget.
The headline PMI composite index was unchanged from the previous month at 50.5 in December, which Williamson said was a sign that the economy “more or less stalled in the fourth quarter.”
However, he added that the loss of confidence and growing job cuts “suggest worse is to come as we enter the new year”.
