UK economy flatlines in run-up to Christmas with ‘worse to come’ as firms rush to cull jobs after Labour’s Budget tax bomb

The UK economy is flatlining in the run-up to Christmas as firms struggle to cope with Labour’s tax bomb Budget.

Closely-watched PMI figures for December show a reading of 50.5 – underlining fears the country is on the brink of recession.

The ‘flash’ figure was unchanged from the 13-month low of November, and below than the 50.7 analysts had expected. Anything under 50 represents contraction.

S&P Global Market Intelligence, which runs the index, warned there is ‘worse to come’ as businesses cut back employment at the fastest rate since the Credit Crunch, excluding Covid. 

Chris Williamson, chief business economist, said: ‘Businesses are reporting a triple whammy of gloomy news as 2024 comes to a close, with economic growth stalled, employment slumping and inflation back on the rise.

‘Economic growth momentum has been lost since the robust expansion seen earlier in the year, as businesses and households have responded negatively to the new Labour Government’s downbeat rhetoric and policies.’

The UK economy looks to be flatlining in the run-up to Christmas as firms struggle to cope with Rachel Reeves’ (pictured) tax bomb Budget

He added: ‘Firms are responding to the increase in national insurance contributions and new regulations around staffing with a marked pull-back in hiring, causing employment to fall in December at the fastest rate since the global financial crisis in 2009 if the pandemic is excluded.’

‘While the December PMI is indicative of the economy more or less stalled in the fourth quarter, the loss of confidence and increased culling of jobs hints at worse to come as we head into the new year.’

Fears have been mounting for the British economy after a second consecutive month of falling GDP.

Activity was down 0.1 per cent in October, after recording the same reduction in September. 

That was far worse than the 0.2 per cent growth analysts had pencilled in, and the first contraction in successive months since the height of Covid.

Although UK plc was still marginally in positive territory over the quarter, businesses voiced alarm that the full impact of Labour’s £40billion Budget tax raid had yet to be felt. 

Economists have warned Britain is on ‘recession watch’, while even Ms Reeves admitted the official figures last week were ‘disappointing’.

The grim numbers could give the Bank of England pause for thought as it decides what to do on interest rates this week – although the MPC is widely expected to keep the level on hold.