What’s going on here?
UK business growth is crawling with December’s S&P Composite PMI dropping to 50.4, its lowest since October 2023, pointing to economic challenges.
What does this mean?
UK firms are feeling the heat of climbing costs, leading to job cuts at a rate not seen for almost four years. Higher social insurance contributions from April have tightened budgets, spurring layoffs. Business confidence, already shaken by October’s tax-heavy budget, remains frail. S&P Global Market Intelligence notes that this negativity is dampening next year’s growth outlook. Future output expectations have dipped to levels reminiscent of the post-Liz Truss ‘mini-budget’ era, suggesting ongoing uncertainty. While the services PMI faltered slightly, the manufacturing PMI plunged further, spotlighting struggles in the sector.
Why should I care?
For markets: Navigating troubled waters.
Investors should prepare for choppy waters as UK economic metrics take a hit. The steep drop in manufacturing PMI and rising layoffs could ripple through markets. While government spending might offer short-term relief, sustained low confidence suggests ongoing market volatility.
The bigger picture: A tangled web of influence.
The UK is navigating economic hurdles and fiscal strategies that could redirect public investment but also stress businesses. This delicate balance of policy actions and market reactions underscores the pivotal role government decisions play in shaping the global economic environment.
