UK Firms Cut Jobs At Fastest Pace Since 2021, BOE Survey Shows

British companies shed jobs at the fastest pace in four years over the summer, according to a Bank of England survey that suggests the fallout from Chancellor of the Exchequer Rachel Reeves’ first budget is still reverberating through the labor market.

Businesses reduced employment by 0.5% in the three months through August, the biggest fall since 2021, the poll of chief financial officers showed on Thursday. Firms expect to add just 0.2% to their headcount over the coming year, a slower pace than previously predicted.

The survey suggests that jobs are bearing the brunt of Labour’s efforts to fix the public finances, as firms try to offset a £26 billion ($35 billion) hike in payroll taxes that took effect in April along with another hefty increase in the minimum wage.

Almost half of firms said they were cutting staff in response to the rise in national insurance contributions. That was the second-most cited response after lower profit margins.

BOE Governor Andrew Bailey said on Wednesday that the health of the jobs market is crucial for the central bank’s thinking on future interest-rate cuts. While policymakers are wary over loosening policy further amid elevated inflation, Bailey said he remains concerned about the weakness of demand for workers.

The BOE’s Decision Maker Panel survey also pointed to mounting concerns among businesses over a fresh spike in price pressures.

Their expectations for year-ahead inflation rose to 3.3%, the highest in 17 months. Longer-term expectations looking three years ahead increased for the first time since January to 2.9%.

Businesses also plan to hike their own prices by 3.7% over the next 12 months — unchanged from July’s survey. Meanwhile, expected wage growth  — a key determinant of price-setting — held at 3.6% for a third month.