Firms shedding jobs at quickest fee in 4 years after Labour’s enormous Budget tax raid as grim figures present providers sector slowdown earlier than Christmas

Businesses are shedding jobs at the fastest rate in four years after Labour‘s Budget tax raid, according to grim figures today.

The closely-watched PMI survey of services sector firms found nearly a quarter saw reductions in their workforce in December – with just 12 per cent reporting an increase.

The overall fall detected was the quickest since January 2021, as companies flagged hiring freezes and delayed replacing leavers.  

The S&P index suggested that the sector remained marginally in growth, scoring 51.1 – with anything above 50 positive.

But the reading was below the 51.4 pencilled in by analysts.

Rachel Reeves is struggling to contain growing anxiety about the impact of the Budget

The closely-watched PMI survey of services sector firms found nearly a quarter saw reductions in their workforce in Decembe

Tim Moore, economics director at S&P Global Market Intelligence, said: ‘The service sector ended last year with only a marginal upturn in business activity and a near-stalling of incoming new work.

‘Survey respondents suggested that falling business and consumer confidence, largely due to worries about domestic economic prospects in 2025, had led to a considerable loss of growth momentum.

‘While most parts of the UK service economy noted weak demand and cutbacks to client budgets, there remained pockets of strong growth in areas such as technology services.’

The figures emerged as separate research suggested business confidence has slumped to a more than two-year low.

A major survey has revealed a grim assessment of the economic situation, with more than half of companies planning to raise prices by early April.

Three quarters of the more than 4,800 firms quizzed said the main cost pressure is sustaining jobs – after Rachel Reeves hiked employer national insurance.

The research by trade group the British Chambers of Commerce found business confidence has fallen since the spending statement, with 49 per cent of firms saying they expect turnover to grow in the next year.

That was down from 56 per cent last year and the level has not been lower since the aftermath of Liz Truss‘s mini-Budget in 2022. 

Some 55 per cent expect prices to increase in the next three months, up from 39 per cent in a similar poll in the second half of 2024. 

BCC director-general, Shevaun Haviland, called the situation ‘a pressure cooker of rising costs and taxes’.

‘Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging,’ she said.

‘Businesses are already cutting back on investment and say they will have to put up prices in the coming months.’

The survey puts more scrutiny on the performance of the economy, with evidence of a slowdown.

Keir Starmer has made boosting UK plc his main priority after winning the election last summer.

But official figures showed the economy had zero growth between July and September, and that it contracted during October.

Keir Starmer has made boosting UK plc his main priority after winning the election last summer

Raising prices would increase the rate of inflation, which fell sharply from record highs in 2022 but rose again in the final months of last year.

Inflation is significant because it is a major influence on where the Bank of England sets the base interest rate.

High inflation usually makes it harder for the Bank’s policymakers to cut interest rates, which in turn means mortgage rates come down more slowly.