Britain's economy did better than expected in January according to the latest PMI indicators from ratings group S&P Global but the rate of staff cuts is also surging.
The UK Services PMI index edged up 51.2 in January vs 50.9 expected and 51.1 last month, helping the composite PMI rise to 50.9 against the expected 50.0 and 50.4 a month ago.
Even manufacturing edged higher to 48.2 compared to forecasts of 47, the previous month’s figure.
The bad news is that S&P Global reported that companies have been cutting employment amid falling sales with that price pressures pointing to an economy heading for stagflation.
In short, the UK is “broadly flatlining with risks remaining skewed to the downside”.
Even in services, new work at the aggregate level fell at the fastest pace since 2023, with companies citing poor underlying demand as clients limited non-essential spending.
“Consequently, staffing levels continued to fall, extending the trend that started in October 2024 due to hiring freezes and non-replacement of voluntary leaves.
“In turn, cost burdens for firms accelerated the most in over 18 months as input prices rose for both manufacturers and service providers. “
Firms surveyed said the Chancellor’s impending £25bn hike in National Insurance had affected recruitment plans.
Chris Williamson, chief business economist at S&P, said: “The loss of confidence, combined with widespread concerns over higher staff costs associated with the Budget, pushed employment sharply lower again.
“Barring the job cutting seen during the pandemic, the rate of job losses signalled by the PMI over the past two months has been the highest since the global financial crisis in 2009.”