British firms slashed jobs at the swiftest pace since the pandemic during the lead-up to Rachel Reeves’ Autumn Budget.
A closely-monitored survey from the Bank of England, which questions finance directors about their staffing levels, revealed that private sector employment dropped by 1.8 per cent in November – the sharpest monthly fall since July 2021.
The financial chiefs also indicated they anticipate reducing workforce numbers by approximately 0.7 per cent on average throughout the coming year, representing the most substantial decline since October 2020.
This followed months of continuous briefing exchanges, which resulted in market turmoil and left enterprises unsettled and plagued with uncertainty.
Pantheon Macroeconomics’ chief UK economist, Rob Wood, said the “chaotic pre-Budget tax hike speculation” resulted in “collapsing job growth”, as reported by City AM.
Wood added that this latest batch of crucial survey data will prompt the Bank to reduce interest rates by a further 25 basis points later this month.
“Sharply weaker employment gains nail a December rate cut,” he said.
“Inflation or official labour market data would have to surprise hugely to stop the MPC reducing rates in December now.
“But there are clearer signs that structural changes in the labour market are supporting pay, which will have to keep the Monetary Policy Committee (MPC) cautious.”
Heightened inflation expectations emerged as a primary concern in the Bank of England’s Decision Makers Panel survey.
The Bank of England has reported that general CPI inflation expectations over a three-year period have risen to three per cent, while one-year ahead expectations remain at 3.4 per cent.
The most recent official inflation data reveals price growth at 3.6 per cent in the year to October, significantly above the UK’s two per cent target.
This conflicting information on declining employment and rising inflation expectations poses a dilemma for the hawks and doves within the Bank of England. They have placed differing levels of importance on inflation expectations and job losses when deciding whether to reduce interest rates.
Recent survey data indicates a plummet in business confidence, ongoing payroll cost pressures, and further investment delays.
Some economic consultancies suggest that the forthcoming Budget could offer some additional stability to businesses in the upcoming months. However, certain sectors, including hospitality, will still need to navigate the effects of various tax increases and policy announcements.
In the coming week, Bank of England Governor Andrew Bailey and other members of the Monetary Policy Committee are anticipated to comment on the impact of Rachel Reeves’ measures, assessing whether the Chancellor has indeed managed to alleviate the cost of living for Britons.
