Britain’s private sector has slid into contraction territory this month as firms reel from the Budget, ending a year’s worth of sustained expansion.
S&P Global reported on Friday that its flash PMI composite output index had dipped to 49.9 in November, from October’s 51.8, with a sub-50-point reading reflecting contraction.
Businesses were “giving a clear ‘thumbs down’ to the policies announced in the Budget,” S&P economist Chris Williamson noted, including hiked employer national insurance.
“The first survey on the health of the economy after the Budget makes for gloomy reading,” he continued.
“Businesses have reported falling output for the first time in just over a year while employment has now been cut for two consecutive months.”
S&P’s manufacturing PMI fell further below the stagnation mark from 49.9 to 48.6, while the services index dropped to 50.0 from 52.0.
Declining business optimism had hit the figures, while concerns were also cited around stronger input inflation, S&P said.
Deutsche Bank analysts noted the data was the first "real test" for last month's Budget and would leave policymakers mulling potential inflation on the back of higher taxes against weaker private sector demand.
"We expect the [Bank of England's] Monetary Policy Committee to be more cautious than ever, treading a fine line between removing policy restraint too quickly, or indeed, keeping policy too restrictive in the face of heightened uncertainty," Deutsche said.