The UK’s business optimism “slumped” in a downturn after the Autumn Budget, according to a closely watched survey of the private sector.
S&P’s ‘flash’ purchasing managers’ index (PMI) came in at 49.9 in November, now below the neutral 50.0 threshold, down from 51.8 last month, and the lowest since October 2023.
Firms reported a fractional decline in business activity throughout the month, in the wake of Labour Chancellor Rachel Reeves’ first Budget on October 30.
It comes after Reeves hiked employers’ national insurance contributions (NICs) and raised the minimum wage, with some 200 of the UK’s top hospitality firms warning additional tax bills will force some into liquidation, drastic headcount cuts and investment slashing.
While new order growth eased to its lowest for one year amid widespread reports of fragile business confidence and a sustained drop in private sector employment, the survey found.
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.”
Budget ‘thumbs down’
He said output and hiring downturns were “marked contrasts” to the “robust growth” of the summer months, amid “deepening concern about prospects for the year ahead”, while the survey indicated the economy “slipping into a modest decline”.
Williamson added: “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.
He stressed: “The loss of confidence hints at worse to come – including further job losses – unless sentiment revives.”
However he noted “encouragingly, inflation pressures have moderated further, with selling prices rising at the slowest rate seen this side of the pandemic”.
PMI data ‘subdued’
Manufacturing saw a “marginal reduction” in volume, alongside “subdued customer demand” and “delayed investment decisions”, S&P said.
Service providers cited “subdued business confidence and caution among clients” post-Budget, while others suggested “clarity following the US election had a positive impact”.
Workforce numbers saw “another marginal decline in private sector employment” with “reduced headcounts” in manufacturing and services and firms in “hiring freezes”.
Business optimism was also at its “least upbeat” since December 2022, thanks to growing payroll costs, and “perceived disincentives to expand investments and hire additional staff”.
The survey also found some goods producers “worried about renewed global trade frictions in 2025”, but others hoped post-US election clarity “would unlock paused investment”.