Firms accelerate job cuts as 12-month growth run ends
Firms have accelerated job cut plans across the private sector as a 12-month run of business growth has come to an end, new data has revealed.
Employers have now slashed headcount levels in each of the last 20 months, with the pace of job shedding in May coming at a faster pace, S&P Global researchers estimated.
International trade disruption due to the Iran war has kept input cost inflation high despite a small drop from April, analysts said, as the services sector struggled to attract new work.
The purchasing managers’ index (PMI) score for the private sector was 48.5, below the 50-mark threshold for neutrality in activity.
Manufacturing businesses bucked the trend as the sector’s PMI remained in positive territory.
The projected downturn in the UK economy was driven by the dominant services sector, with the services PMI hitting its lowest reading since January 2021 — and, outside of the pandemic, its weakest in almost a decade.
Labour’s leadership battles and policy uncertainty was also flagged as an additional drag on client confidence.
Jake Finney, a senior economist at the consultancy PwC, said uncertainty around global trade of critical supplies and political uncertainty was “starting to weigh on the UK economy”.
“This is not entirely surprising,” he added. “May’s softer reading may partly reflect payback after April’s unusually strong outturn, which was likely flattered by some front-loading of activity.
“However, the scale of the decline is more concerning, with service providers reporting the sharpest fall in activity since the pandemic.”
Larger employers issue jobs warning
Separate survey data published by the Office for National Statistics on the same day painted a similarly gloomy picture of cost pressures building across the economy.
Around two in five trading businesses reported that the prices of goods or services they bought had increased in April, the highest proportion since December 2022.
Meanwhile, around one in six reported an increase in the prices of goods or services they sold — the highest proportion since April 2023.
Economic uncertainty was the most commonly cited challenge impacting turnover, with 34 per cent of trading businesses flagging it in early May — up 13 percentage points from the same period two years ago.
For larger businesses, labour costs topped the list of concerns, with two in five firms with 10 or more employees pointing to wages as a drag.
Official data this week showed that unemployment crept back up to five per cent while vacancies fell to a five-year low, uncovering the struggles faced by job seekers. Youth unemployment was also at an 11-year high.