Private sector axes more jobs amid Reeves’ tax and wage pressures
The UK’s private sectors culled jobs for the seventeenth consecutive month in February led by a significant drop in the services sector as businesses were still digesting the impact of Labour’s 2024 Autumn Budget.
The latest flash Purchasing Managers Index (PMI) from S&P Global described the rate of job shedding in February as at a “solid pace” but “fractionally slower” than the decline in January 2026.
But the services sector was highlighted for a “particularly sharp drop” in payroll numbers compared to that in manufacturing, which also suffered a loss.
This came as the headline reading for the PMI nudged up to 53.9 from 53.7 last month – stretching further above the 50.0 threshold which indicates growth. The figure also signalled the fastest rise in private sector activity since April 2024.
“Despite enjoying higher demand for goods and services, companies remain focused on boosting productivity to cut costs, resulting in yet another month of steep job losses to prolong the continual jobs downturn that was initiated by the 2024 Autumn Budget,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Average cost burdens for private sector firms were reported to have increased “sharply” in February. Since Chancellor Rachel Reeves’ first Budget – where she hiked employers’ national insurance contributions 1.2 per cent – businesses across the board have pointed to a dampened appetite for hiring as costs swelled.
Wage pressures hit jobs market
S&P also reported the rate of price inflation eased to a three-month low but was still recorded at above the survey average.
“This was largely due to another steep increase in business expenses across the service economy, which survey respondents mostly attributed to elevated wage pressures,” the report said.
Pressure has piled on the government over continuous increases to the minimum wage as unemployment continues to surge.
The Bank of England’s Catherine Mann has said the rise in youth unemployment reflected “disproportionately big increases in the minimum wage for that age group”.
Just north of 16 per cent of people aged 16 to 24 were registered as unemployed compared to the national average of just over five per cent, in new data this week. In the final quarter of 2025, joblessness among young people soared to 740,000 hitting an 11-year high.
The figures ramped up scrutiny on Labour’s manifesto promise ahead of the 2024 General Election to ditch “discretionary age bands”.
On Wednesday, Reeves avoided directly answering whether the government would drop or delay the pledge amid rising unemployment, specifically in younger generations.
Sir Keir Starmer later confirmed the pledge would remain, saying: “We’ve made commitments to young people in our manifesto, and we will keep to those commitments, including the commitment that we would make sure that the living wage would go up this April, which I can absolutely confirm to you will happen.”