In October, British businesses experienced their slowest growth in nearly a year, while workforce numbers declined for the first time in 2024 due to uncertainty ahead of the Labour government’s upcoming budget, according to a recent survey.
The preliminary S&P Global Flash Composite Purchasing Managers’ Index registered a decline to 51.7 from 52.6 in September, staying above the growth-contraction threshold of 50, yet marking the lowest level since November 2023. This reading was below the expectation of economists in a Reuters poll, which had forecasted a consistent 52.6.
The services sector business activity index dropped to 51.8, reaching an 11-month low. Simultaneously, the manufacturing index fell to a six-month low of 50.3, primarily due to a significant decline in overseas goods orders.
Chris Williamson, a chief business economist at S&P Global Market Intelligence, noted that the survey indicated a modest economic growth rate of 0.1% for October. He emphasized the potential impact of upcoming budget policies on future economic direction, while uncertainty stemming from geopolitical tensions in the Middle East and Ukraine, along with the U.S. presidential election, further compounded business concerns.
Prime Minister Keir Starmer’s administration aims to accelerate economic growth to facilitate increased public spending, though diminishing business confidence could pose a significant hurdle to attracting investment.
Finance Minister Rachel Reeves is scheduled to present her budget plan, addressing taxes and expenditures, next Wednesday, while she cautioned about potential tax hikes to confront a 22 billion-pound fiscal gap identified after her government assumed power in July.
Official data revealed that government borrowing exceeded expectations set by Britain’s budget forecasters for the first half of the fiscal year.
Additionally, October’s PMI figures reflected easing cost pressures on companies, with some businesses reporting lower commodity and fuel expenses, driving input price inflation down to 57.8, its lowest level since December 2020.
Williamson suggested that this reduction in input cost inflation could enable the Bank of England to pursue a more aggressive interest rate reduction strategy if the economic slowdown continues to deepen.
