A flash PMI survey by ratings agency S&P Global shows a litany of worrying news for the UK, including weakening growth, slumping overseas trade, worsening business confidence and further steep job losses.
“With the weakening of business activity growth to a rate consistent with the economy almost stalling, and around 50,000 job losses being signalled by the PMI again in the three months to September, alarm bells should be ringing that the economy is faltering, which could help shift the policy debate at the Bank of England back towards a more dovish stance,” the agency said in a note on Tuesday (23 September).
“However, amid talk of further tax rises being needed in the Budget later this year, it’s not surprising to see that business expectations have worsened again in September, and in the absence of an improvement in confidence, it’s unlikely that the economy will make any strong gains in the months ahead, irrespective of the outlook for interest rates.”
Business growth slows
UK business activity slowed sharply in September. At 51.0, a four-month low and down from 53.5 in August, the September flash PMI headline composite output index signalled a marked step-down in the pace of economic growth at the end of the third quarter.
The PMI is broadly consistent with GDP almost stalling in September, but quarterly growth of almost 0.2% is indicated for the third quarter as a whole.
As has been the case over the past year, growth was again led by the service sector in September, though its rate of expansion slowed from August’s 16-month high. Manufacturing meanwhile acted as an increased drag on the economy, with output falling at the steepest rate since March, suffering one of the sharpest declines seen over the past year and a half.
Job losses reported for 12 straight months
A key area of concern in the PMI survey in recent months has been the deteriorating employment situation, which persisted into September. A further steep drop in staffing numbers in September means the survey has signalled 12 successive months of job cutting, initiated by last autumn’s Budget.
The latest survey signals about 50,000 private sector jobs being cut in the three months to September. This past year has therefore been the worst spell for employment since the global financial crisis of 2008-,9 bar only the pandemic.
Lower employment was signalled in both manufacturing and services in September, with only the tech sector reporting any jobs growth.
While many companies reported lower employment due to the non-replacement of leavers, the survey saw several companies reporting redundancies.
Higher costs associated with National Insurance and minimum Wage increases were widely cited as the driver of lower staffing levels, aggravating pressure on headcounts from the current weak demand environment.
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