What’s going on here?

UK businesses have cut jobs at the fastest rate since January 2021. New tax policies, particularly higher social security contributions starting October, are hitting hard.

What does this mean?

Labour’s recent budget decisions are biting into company finances, sparking widespread job cuts. The S&P Global Flash Composite PMI held at 50.5 in December – a sign of stagnation. While services managed to rise to 51.4, manufacturing dipped to 47.3. Rising wages and costs are driving prices up at the fastest pace in nine months, leaving businesses more pessimistic about the economy’s future. Many companies are pausing hiring and opting to weather the current economic storm.

Why should I care?

For markets: Market uncertainty grows by the day.

Investors and businesses are closely watching the Bank of England, which plans to keep interest rates steady. This pause occurs amid pronounced job market weaknesses and ongoing inflation concerns, suggesting a potentially stagnant start to 2025 for the broader economy.

The bigger picture: Economic headwinds signal a slowdown.

The UK could face further economic challenges as we head into 2025, with business expectations at their lowest since December 2022. The Labour government’s tax policies are creating significant uncertainties, influencing market dynamics and future fiscal policies, particularly as manufacturing orders dwindle due to reduced demand from Europe.