United Kingdom’s private sector is witnessing the most significant staff cuts since the global financial crisis and the COVID-19 lockdowns, increasing fears of a looming recession. The composite Purchasing Managers’ Index (PMI) from S&P Global fell from 48.6 in August to 46.8 in September, indicating the steepest decline in output since the January 2021 lockdown. This data surpassed economists’ predictions and pushed the private sector further into contraction.
S&P Global reported a sudden shift in the job market, noting the swiftest staff cuts since October 2009, excluding the lockdown periods. These findings heighten concerns about a potential economic downturn in the UK, as the PMI marks its second consecutive month of being below the 50 benchmark that distinguishes growth from contraction.
However, there is an increasing confidence in the Bank of England’s battle against inflation due to signs of a relaxing labour market. “A recession is looking increasingly likely in the UK,” according to Chris Williamson, the Chief Business Economist at S&P Global Market Intelligence. He added, “A major concern in the inflation outlook has been wage growth, but with the survey now signaling the sharpest fall in employment since 2009, wage bargaining power is being eroded rapidly.”
The report also highlighted that the fall in private sector business activity was the steepest since March 2009, excluding the pandemic period. Businesses are pointing fingers at the cost-of-living crisis and elevated interest rates for the low demand. Despite the weakening economy, there are indications of cooling inflation. The input price inflation witnessed its largest monthly decline in 2023 as of yet.