UK private sector growth has hit an 11-month low, with companies expressing concerns about economic uncertainty ahead of the budget. S&P Global reports that growth slowed this month, leading to a decline in business activity and increased worries about domestic economic growth prospects. The Flash UK PMI Composite Output Index fell to 51.7, the lowest since November 2023, with both manufacturing and services sectors experiencing weakening growth.
Business economist Chris Williamson attributes the slowdown to government rhetoric and uncertainty regarding the budget, along with geopolitical tensions. The weakening business confidence has also resulted in firms cutting headcounts for the first time this year. Additionally, concerns about consumer spending have risen as a PwC survey shows a plunge in consumer confidence, particularly among older people and lower-income households.
The upcoming budget has also caused UK borrowing costs to rise as Chancellor Rachel Reeves prepares to introduce a new debt rule that could release an extra £50 billion for infrastructure spending. Barclays CEO and other analysts have backed Labour’s plans for the budget, hoping for increased investment to stimulate economic growth. The IMF has warned against a global trade war that could significantly impact the world economy.
Elsewhere, German business activity continues to contract, and retail companies like Travis Perkins have cut profit forecasts due to declining sales. Mergers and acquisitions have been on the rise for some companies, with Barclays reporting higher-than-expected profits in the third quarter.
Bank of England Governor Andrew Bailey stated that UK inflation is cooling faster than anticipated, suggesting a possible rate cut in the near future. Bailey’s comments come as policymakers gather for the annual meetings of the IMF and the World Bank Group in Washington DC, where UK Chancellor Rachel Reeves plans to present the budget as an economic reset for the country.
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