UK service businesses have cut employment for the fifth successive month, according to the final S&P Global purchasing managers’ index (PMI) for February.
The survey’s data highlight what economists describe as a “loss of growth momentum” since the autumn budget, with some firms citing the Chancellor’s £25 billion increase in employers’ national insurance as a key factor.
This prolonged spell of job losses is the most extended period of contraction since early 2011, excluding the Covid-19 downturn. Tim Moore, Economics Director at S&P Global Market Intelligence, says reduced optimism and ongoing cost pressures “led to net job shedding across the service economy in February.”
Despite these figures, some analysts urge caution over the PMI’s apparent gloom. Rob Wood, Chief UK Economist at Pantheon Macroeconomics, points out that the index “asks only how many firms are cutting output or employment, rather than by how much.” Indeed, official data from the Office for National Statistics suggest unemployment remains near a historic low of 4.4 per cent.
The final services PMI reading edged up to 51 in February from 50.8 in January, remaining above the 50-point threshold that separates expansion from contraction. However, it was slightly below the preliminary “flash” reading. The composite PMI, which gauges activity across the entire UK private sector, slipped marginally to 50.5 from 50.6.
Economists note that the Chancellor is now focusing on potential public spending cuts in the run-up to the spring statement on 26 March to uphold her fiscal targets. The Office for Budget Responsibility is expected to warn that her £9.9 billion margin for error may have eroded since October, owing to higher government bond yields and softer economic growth forecasts.
Thomas Pugh, an economist at consultancy RSM UK, observes that the tepid PMI performance implies the economy “continued to flatline” in the first quarter, yet he suspects the survey underestimates the underlying strength of economic activity. Meanwhile, analysts suggest that President Trump’s tariffs have weighed particularly on British manufacturing, a sector more vulnerable to potential import levies and global trade uncertainties.