The UK’s private sector has gone into reverse for the first time in a year as the impact of Labour’s Budget raid becomes clear.
Closely-watched PMI figures for this month were worse than analysts had pencilled in amid mounting fears of a slowdown.
The reading was 49.9 instead of the 51.8 expected, with anything below 50 representing a contraction.
The blow emerged as separate figures revealed shops saw sales slump last month ahead of Rachel Reeves‘ major tax and spend package.
Retail volumes were down by 0.7 per cent, far more than anticipated, as nervous consumers waited for the Budget hammer to fall.
The Office for National Statistics has also revised down the 0.3 per cent growth estimated for September to just 0.1 per cent.
Retailers were already warning of job cuts and price hikes to come after Labour hiked employer national insurance contributions.
The measure is set to raise £25billion for the Treasury, helping to fund a spending splurge on public sector wages and services – but economists have warned it will also hold down growth and fuel inflation.
Closely-watched PMI figures for this month were worse than analysts had pencilled in amid mounting fears of a slowdown
British shops saw sales slump last month as jittery Brits braced for the massive Budget tax raid
Retail volumes were down by 0.7 per cent, far more than expected, as consumers waited for Chancellor Rachel Reeves to drop the hammer
ONS senior statistician Hannah Finselbach said clothing stores were particularly badly hit
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘The first survey on the health of the economy after the Budget makes for gloomy reading.
‘Businesses have reported falling output for the first time in just over a year while employment has now been cut for two consecutive months.
‘Although only marginal, the downturns in output and hiring represent marked contrasts to the robust growth rates seen back in the summer and are accompanied by deepening concern about prospects for the year ahead.
‘Business optimism has slumped sharply since the general election, dropping further in November to hit the lowest since late 2022.
‘Companies are giving a clear ‘thumbs down’ to the policies announced in the Budget, especially the planned increase in employers’ national insurance contributions.’
The fall in retail sales volumes in October was heavier than expected, with economists predicting a 0.3 per cent decline.
ONS senior statistician Hannah Finselbach said: ‘Retail sales fell back in October following three months of growth.
‘The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the Budget.
‘However, when we look at the wider trend, retail sales are increasing across the three month and annual periods, although they remain below pre-pandemic levels.’