UK Firms Cut Staff At Fastest Pace In Four Years Ahead Of Budget

UK businesses cut jobs at the steepest rate in four years in the weeks leading up to the Budget, as firms grappled with rising labour costs and growing economic uncertainty.

Private-sector employment fell sharply in November, marking the fastest monthly decline since July 2021, according to business surveys.

Finance directors also became markedly more pessimistic at the time, with staffing levels expected to continue shrinking over the year ahead at the fastest projected pace since late 2020. The deterioration in employment conditions reflected mounting pressure on company balance sheets, driven by sustained cost inflation, subdued demand in parts of the economy and uncertainty surrounding future tax and spending policy ahead of the fiscal statement.

The slowdown in hiring and acceleration in job losses added to already visible strains in the labour market, including falling vacancies and subdued recruitment activity across large parts of the economy. Economists warned that prolonged weakness in employment could weigh further on consumer confidence and spending, increasing the risk of a broader economic slowdown as the country moved into a critical fiscal period.

The figures highlighted growing caution among employers as they sought to protect margins in the face of persistent cost pressures. While inflation had eased from its former highs, businesses continued to report elevated prices for energy, raw materials, logistics and wages, all of which limited their ability to invest and expand headcounts.

Survey data at the time also suggested firms were reluctant to commit to long-term hiring decisions without greater clarity over tax policy, public spending and the wider economic outlook following the Budget. This hesitation was reflected in reduced recruitment activity, fewer permanent roles being advertised and a greater reliance on short-term contracts in some sectors.

The cooling of the labour market came after a prolonged period of post-pandemic resilience, when employment had held up better than many economists expected. Recent trends, however, pointed to a shift in sentiment, with businesses increasingly prioritising cost control over growth as they navigated a tougher trading environment.