Driven by rising employment costs and growing global uncertainty, UK businesses are cutting jobs at the fastest rate since February.. A closely watched business survey points to a weakening economy, with the flash S&P Global purchasing managers’ index (PMI) for July showing a drop in new orders and declining confidence across key sectors.
The report revealed that companies are trimming staff in response to higher payroll taxes and subdued demand. Manufacturers reported flat output, while the services sector saw a fall in sales. The latest snapshot of activity comes just two weeks before the Bank of England is expected to lower interest rates from 4.25% to 4% in an attempt to revive growth.
Business leaders said recent tariff threats from Donald Trump and added UK employment taxes have created a challenging environment. Export sales have now fallen for nine consecutive months, although July’s decline was less severe than earlier in the year.
Unemployment rose to 4.7% in May – the highest in four years – while wage growth slowed for the third month in a row and hiring levels dropped.
With inflation still at 3.4%, above the Bank’s 2% target, the decision on rate cuts is finely balanced. Officials have warned that price pressures may not ease significantly until 2026.
Despite the current difficulties, firms remain hopeful. Many expect global instability to ease and interest rates to fall further, helping boost consumer confidence and spending in the year ahead.
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