UK service providers have reduced employment for five consecutive months, the longest decline since early 2011, signaling concerns about growth momentum following the Chancellor's £25 billion National Insurance hike. While the official unemployment rate remains low at 4.4%, businesses are hesitant to hire amid rising costs. Economist Rob Wood suggests that PMI data may overstate economic weakness. As the spring statement approaches, further public spending cuts are likely to be discussed, with warnings about the diminishing fiscal buffer given higher bond yields and slowing growth.
UK service providers have shed jobs for the fifth consecutive month, the longest streak since early 2011, raising concerns over growth momentum and cautious hiring.
Due to a £25 billion increase in National Insurance contributions, firms are tightening budgets, with the sector exhibiting a clear loss of growth momentum according to Tim Moore.
Economists caution that PMI figures might exaggerate economic weakness as they only reflect the number of firms cutting output or staff, not the extent of reductions.
With the Chancellor contemplating further cuts in public spending by March 26, the Office for Budget Responsibility may warn that the fiscal buffer has nearly evaporated.
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