- The S&P noted service businesses ‘widely commented’ on hiring moratoriums
- In the last Budget, Rachel Reeves announced a hike in National Insurance rates
Service industry employment fell at its fastest pace for almost four years at the end of 2024 as bosses reacted to weaker demand and increased payroll costs.
The closely-watched S&P Global UK Services Purchasing Managers’ Index (PMI) shows that December’s fall in staff numbers was the largest since January 2021.
Excluding the years distorted by the Covid-19 pandemic, it was the steepest fall in over 15 years.
The monthly survey found 23 per cent of respondents reported a drop in workforce levels, compared to 12 per cent who had indicated a rise.
The S&P noted service businesses ‘widely commented’ on hiring moratoriums or not replacing leavers because of higher employee costs.
In October, Chancellor Rachel Reeves revealed employers would pay a 15 per cent National Insurance levy on staff salaries exceeding £5,000 from April, instead of the current 13.8 per cent rate on wages above £9,100.
S&P said there was ‘anecdotal evidence’ of client confidence decreasing following the announcement of a forthcoming uptick in NI contributions.
Letting go: Service industry employment fell at its fastest pace for almost four years in December owing to weaker demand and increased payroll costs
Reeves further declared that the National Living Wage would go up by 77p to £12.21 per hour, while the National Minimum Wage for 18 to 20-year-olds would soar by 16.3 per cent to £10 per hour.
Many prominent retailers have warned that the measures could force them to cut jobs and pay, push up prices, or shut down stores.
Tim Moore, economics director at S&P Global Market Intelligence, said: ‘Faced with subdued demand conditions and hikes to employment costs, many service providers opted to curtail their staff hiring and delay backfilling roles in December.’
He also observed a ‘post-Budget slump’ in business optimism amidst concerns about burgeoning payroll expenses and a ‘general unease about the climate for business investment’.
At the same time, S&P said input cost inflation rose at its quickest rate since April due to growing salaries and raw material costs, while overall new orders were ‘close to stagnation’ across the service economy.
However, the S&P still gave a final PMI reading of 51.1 for business activity last month, up from 50.8 in November, and the fourteenth successive month it has surpassed the neutral 50.0 mark.
Any number above 50 indicates growth, while all numbers under that figure denote contraction.
The S&P’s figures come four days after its manufacturing PMI fell by one point to an 11-month low of 47 in December.
Output, employment and new orders all declined at a swifter pace than the prior month because of client destocking, weaker market confidence, and firms restructuring ahead of the upcoming increase in labour costs and National Insurance rates.
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .