UK private sector employment sees fastest decline in nearly four years

(Sharecast News) - The UK experienced the fastest decline in private sector employment for nearly four years in December, despite a marginal increase in output, according to a survey released on Monday. The S&P Global flash UK PMI composite output index printed at 50.5, unchanged on November. This remained above the 50.0 mark that separates contraction from expansion but was a touch below expectations for a reading of 50.7.

The flash manufacturing purchasing managers' index fell to an 11-month low 47.3 in December from 48.0 the month before.

The services PMI, meanwhile, rose to 51.4 from 50.4, hitting a two-month high.

The survey found that softer demand, rising employment costs and squeezed margins contributed to a further reduction in private sector headcounts at the end of 2024. The latest decline in workforce numbers was the steepest since January 2021.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "Businesses are reporting a triple whammy of gloomy news as 2024 comes to a close, with economic growth stalled, employment slumping and inflation back on the rise.

"Economic growth momentum has been lost since the robust expansion seen earlier in the year, as businesses and households have responded negatively to the new Labour government's downbeat rhetoric and policies. Business confidence has sunk to a two-year low as companies weigh up a tougher outlook for sales alongside rising costs, notably for staff as a result of changes announced in the Budget. The survey's price gauges are indicating that inflation is turning higher again.

"Firms are responding to the increase in National Insurance contributions and new regulations around staffing with a marked pull-back in hiring, causing employment to fall in December at the fastest rate since the global financial crisis in 2009 if the pandemic is excluded."