According to data published by S&P Global on Friday, companies in the UK’s private sector have been downsizing their workforce at the fastest rate since the global financial crisis, excluding the Covid-19 pandemic lockdowns. This downsizing is in response to a decline in output in September.
The latest flash S&P Global Composite Purchasing Managers’ Index (PMI) figure for the UK dropped to 46.8, down from 48.6 in August, marking a 32-month low. The reading was below the 50-mark, which indicates growth, and it also fell short of economists’ expectations. Chris Williamson, chief business economist at S&P Global Market Intelligence, warned that the disappointing PMI survey results for September suggest a recession is becoming increasingly likely in the UK.
Williamson added, “The steep fall in output signaled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement.”
S&P Global also highlighted that the British jobs market is facing an “abrupt turnaround,” with companies shedding staff at the fastest pace since the aftermath of the 2008 global financial crisis, excluding the pandemic. This rapid decline in employment is eroding wage bargaining power, which raises concerns about the inflation outlook.
Overall, S&P concluded that private sector business activity in the UK fell at the fastest rate since March 2009. This decline can be attributed to a combination of the cost-of-living crisis and surging borrowing costs, both of which have dampened demand.
With the UK facing the prospect of a recession and companies reducing their workforce at a rapid pace, the economy is at a critical juncture. The government will need to take decisive action to stimulate growth and support businesses.
The news of this downturn in the private sector adds to the growing economic challenges faced by the UK. In recent months, concerns about Brexit and the ongoing difficulties caused by the Covid-19 pandemic have created an uncertain business environment. The government’s decisions in response to these challenges will be crucial in determining the trajectory of the UK economy.
In summary, the UK’s private sector has experienced a decline in output in September, leading companies to cut staff at the fastest rate since the 2008 financial crisis. This downsizing is a cause for concern as it indicates a potential recession and has negative implications for wage growth and overall business activity. The government will need to implement effective measures to address these economic challenges and ensure the country’s recovery.