Private sector companies across the UK have slashed jobs at the sharpest rate since February, according to new data, as Rachel Reeves’s tax policies and rising payroll expenses continue to bite.
The S&P Global Flash UK PMI for July revealed that employment in both the manufacturing and services sectors declined for the 10th consecutive month, highlighting a deepening strain on businesses.
Employers cited a sharp rise in staffing costs—including increased employer National Insurance contributions and a higher national minimum wage, both introduced in the Chancellor’s Budget—as key reasons for redundancies and recruitment freezes.
Amid this economic backdrop, the FTSE 100 rose by 1%, hitting a record high, while the pound weakened on expectations that the Bank of England may be forced to cut interest rates in its next policy meeting scheduled for August.
Chris Williamson, Chief Business Economist at S&P Global, commented: “The latest UK PMI data shows the economy faltering as we enter the second half of 2025. We’re seeing sluggish output growth, weak demand, and business confidence under pressure—many of which are linked to the long-term effects of policy changes from last year’s Budget, as well as ongoing global uncertainty.”
He warned that the sustained decline in employment is particularly concerning: “Rising staff costs have worsened existing concerns among businesses, prompting further job cuts in July. The continued reduction in headcounts and the overall weak growth trend are likely to increase pressure on the Bank of England to ease rates next month.”
The July PMI data paints a bleak picture of the UK’s economic momentum, with firms struggling to balance increased operating costs against subdued customer demand.
The figures raise fresh questions about the long-term impact of government fiscal policies and the stability of the labour market going forward.
