British businesses reported their slowest growth in 11 months this October, with hiring experiencing its first decline of the year due to rising uncertainty ahead of the Labour government’s inaugural budget, according to a recent survey.
The preliminary S&P Global Flash Composite Purchasing Managers’ Index (PMI) for October decreased to 51.7, down from 52.6 in September. While this reading remains above the neutral threshold of 50 that separates growth from contraction, it marks the lowest level since November 2023. Economists had predicted another stable reading of 52.6.
The survey revealed that the business activity index for the services sector fell to 51.8, the lowest in nearly a year, while the manufacturing index slipped to 50.3, a six-month low, primarily due to a significant drop in foreign goods orders.
Chris Williamson, chief business economist at S&P Global Market Intelligence, indicated that the data suggests the economy is growing at a mere quarterly rate of 0.1% in October. “Clearly, the policies announced in the budget have the potential to play a major role in steering the direction of the economy in the months ahead,” he noted.
Adding to the sense of unease among businesses are geopolitical uncertainties, including conflicts in the Middle East and Ukraine, as well as concerns over the upcoming U.S. presidential election. Prime Minister Keir Starmer’s government is aiming for accelerated economic growth to facilitate increased public spending, but dwindling business optimism may hinder efforts to stimulate investment.
Finance Minister Rachel Reeves is set to unveil her budget plan regarding taxes and spending next Wednesday. She has cautioned that some taxes will need to rise after revealing a £22 billion fiscal deficit shortly after assuming office in July.
Further details from October’s PMI data indicate a reduction in cost pressures for companies, with several citing lower commodity prices and decreased fuel costs. Input price inflation fell to 57.8, the lowest level since December 2020. Williamson remarked, “A further cooling of input cost inflation to the lowest for four years opens the door for the Bank of England to take a more aggressive stance towards lowering interest rates, should the current slowdown become more entrenched.”
Additionally, the PMI data indicated a contraction in employment for the first time since December, driven by the sharpest decline in service sector employment in 13 months.
Related Topics:
SAP Shares Hit All-Time High After Upbeat Cloud Business Outlook
UK Business Confidence Hits Twelve-Month Low as Autumn Budget Looms
