UK firms cut back on hiring as rising costs hit business optimism
British firms have begun cutting back on hiring as services businesses suffered a hit from the UK’s cost-of-living crisis, new research from BDO shows.
Hiring has fallen to its lowest levels since December 2021, following a sharp drop in business output over the previous year, data from BDO’s business trends report shows.
UK business output fell for the fourth month in a row to its lowest levels since March 2021 after the British economy first reopened following the third national lockdown.
The drop in output, from an index rate of 122.09 in January 2022 to 89.15 in January 2023, came as weakened consumer spending took a severe hit on the UK’s services sector.
Falling productivity in turn saw business optimism flatline, as the service sector’s decline offset increased confidence in Britain’s manufacturing industry.
Concerns about soaring inflation saw the service sector’s confidence continue to fall, as a slowing rate of inflation in manufacturing inputs caused an uptick in the industry’s optimism.
Inflation, however, eased from its peak, to its lowest levels since March 2022, as falling wholesale energy prices seeped into the wider economy.
BDO partner Ed Dwan said: “The outlook still remains bleak for businesses, with hiring intentions at their lowest levels in over a year and ever-increasing economic headwinds driving threats of a recession.”
Yet “with a new Department for Business and Trade in place and a Spring Budget on the horizon, there is space in Government to consider how best to offer firms a helping hand,” the BDO partner said.
“Businesses need the right support in place to ensure they can weather the challenges ahead and focus on continuing to drive the growth of the UK’s economy,” Dwan said.