Discover why service firms are cutting jobs at a speed reminiscent of 2020 as they brace for tax hikes, and what this means for the climate of business optimism.
Henry Russell
fastest pace since 2020 amid cost hikes.
yet below economists’ expectations.
business outlook, sparking employment fall-off.
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Fasten your seatbelts; it's cutback season in the UK service sector, and it seems like we're cruising down memory lane, circa 2020. As companies gird their loins for the financial meteors known as tax and wage hikes, February saw job cuts speed up in a dramatic twist that echoes the not-so-distant past of the pandemic era.
Brace yourself for the latest from the S&P Global UK services PMI survey, which clocked a 51 in February. That's a noble attempt at growth (remember, any score above 50 means you're at least jogging, rather than crawling), but it didn't quite reach the 51.1 mark economists were shooting for.
February's score, while it chalked in higher than January’s 50.8, wasn’t enough to distract from the ominous clouds of high costs on the horizon. April's impending financial year start will usher in higher minimum wages and increased employer taxes, making accountants everywhere tut in quiet desperation.
According to Tim Moore, the charismatic economics director at S&P Global Market Intelligence, our service sector heroes have lost their growth momentum since autumn. He puts it bluntly: upcoming payroll hikes, among other concerns, are nudging businesses over the edge of optimism.
"We're seeing a drop in business expectations and a sharp rise in input prices leading to net job shedding across the service economy," Moore explains. The numbers are compelling: for five months straight, employment figures have nosedived. If it weren’t for a microscopic worldwide virus, the last time we saw this was early 2011.
While businesses scramble to prepare for the looming April storm, those still anchored in the sector brace for impact. For the rest, well, buckle up; this might be a rocky fiscal season.
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