No Christmas cheer for employers as 2024 draws to a close
There are plenty of reasons to be cheerful at this time of year, but the state of the economy isn’t one of them. As Christmas trees go up and celebrations get underway, there are worrying signs that large parts of corporate Britain are preparing to end the year in a state of nervousness and pessimism.
For its part, the government is able to point to seemingly bullish growth forecasts courtesy of the OECD, which last week predicted a healthy economic uptick next year, but do not be taken in. The forecasts concede that economic growth will be driven by public spending, something described as a “sugar rush” by the IFS in their immediate reaction to the Budget.
Meanwhile, in the real economy, employers are braced for a year ahead that’s set to be dominated by a squeeze on profits, higher taxes, increased costs and a wave of complexity courtesy of new employment law.
As our front page story today shows, business confidence slumped in November and the jobs market is starting to resemble a frozen wasteland.
The Bank of England’s most recent survey of employers produced findings that should erode whatever Christmas cheer has been mustered in Downing Street. Just under 60 per cent of firms questioned in the Bank’s regular Decision Makers survey said they expect lower profit margins as a direct result of the Budget. Most worryingly, 54 per cent said they will raise prices and the same amount said they expect to cut jobs. Just under 40 per cent said they will pay lower wages than they otherwise would have done.
Within days of this data being published, the Prime Minister hosted a reception in honour of Small Business Saturday, in which he praised the people who start and run businesses, saying his policies will “drive economic growth across the country.” There’s no other way to put it; this was gaslighting.
Tomorrow, the Chancellor kicks off a major public spending review and she is charging departments to make substantial savings. It will not be easy, and the government will need the private sector more than ever in the months and years ahead if they’re to build anything close to sustainable economic growth.
It is therefore an absurd tragedy that their policies are set to result in fewer jobs and lower pay.