UK Firms Lost Momentum and Cut Staff After Budget, Surveys Show

• British business activity growth slowed to a crawl in December and employers cut staffing at the fastest rate in almost four years as a slump in corporate morale after the government's budget rumbled on, a survey showed on Monday.
• The final headline UK S&P Composite Purchasing Managers' Index (PMI) inched down to 50.4 from 50.5 in November, its lowest since October 2023. A preliminary reading for December had also been 50.5. The survey is barely above the 50 dividing line between growth and contraction and adds to a run of lacklustre economic indicators since Finance Minister Rachel Reeves announced the biggest tax rises since 1993 in October.
• Britain's economy stagnated in the three months to September and the Bank of England has estimated that it will flatline again in the fourth. While the BoE thinks higher public spending will temporarily boost growth this year, a big question for its policymakers, as they consider how quickly to cut interest rates, is whether Reeves' tax rises lead mostly to lower employment, higher prices or reduced profits and investment.
• Investors are pricing in just two quarter-point rate cuts by the BoE in 2025 as inflation pressures remain sticky. "A post-Budget slump in business optimism persisted in December, with output growth expectations for the year ahead unchanged from November's 23-month low," said Tim Moore, economics director at S&P Global Market Intelligence.
• Companies that had cut staffing in December overwhelmingly cited rising costs, particularly due to Reeves' increase in employer social insurance contributions from April. The PMI's gauge of future output fell to its lowest level since December 2022, while costs faced by businesses increased at the fastest pace since April. The BCC survey of nearly 5,000 businesses showed that 55% of firms planned to raise prices, up from 39% the quarter before, while 24% intended to cut investment, up from 18% previously.

(Source: Reuters)