Firms scramble to ‘protect bottom line’ amid low growth
Firms across the UK are putting in “hard work” to limit cost pressures and maintain profits amid low growth, one of the country’s biggest banks has said.
Chancellor Rachel Reeves’s aggressive tax hikes at her last Autumn Budget have piled higher employment costs on businesses large and small, threatening to kill off some companies by eating into their profits.
But new research by Lloyds has suggested that there are pockets of mild success within the UK economy as just under a third of UK sectors reported growth.
Four UK sectors appeared to have grown, according to Lloyds, an unchanged figure from data released for February.
The banking giant compiled responses to S&P Global’s UK manufacturing and services purchasing managers’ index (PMI) data to arrive at its conclusions. This means that some 1,300 private sector companies are covered in sectors ranging from financial services to healthcare and mining.
The growth tracker pointed to weak demand across the UK economy as fewer orders were reported in food and drink manufacturing, industrial goods and other areas including tourism.
Car manufacturing and healthcare suffered heavy falls, pointing to the divergence between the relative success of the UK’s services economy and downturn in goods.
Real estate saw an increase in the volume of property purchases in March before new stamp duty land tax thresholds came into effect.
The overall weak performance of the UK economy was largely put down to higher wages and costs of materials.
Lloyds economist Nikesh Sawjani suggested the UK’s private sector has been remarkably resilient in facing up to the mounting challenges both on a domestic and global level, with the number of sectors reporting growth being much higher than levels seen at the start of the year.
“[This] illustrates the hard work that businesses in all 14 sectors – including those who did not report growth this month – are doing to drive efficiencies, protect their bottom line, and safeguard customer loyalty,” Sawjani said.
City analysts have rapidly downgraded their UK growth predictions for the next two years in the wake of President Trump’s tariffs, which has sparked a global trade war and likely weigh down on a rise in GDP.
A recent average of ten forecasters said the UK economy would grow at a sluggish pace of 0.8 per cent this year.
The Bank of England said UK growth would hit 0.75 per cent before Trump unveiled his taxes on vehicles and goods from China. It could yet revise its outlook downwards at the Monetary Policy Committee (MPC)’s next decision in May.