UK faces ‘stagflation’ warning amid rising costs, jobs cuts and faltering growth

The UK's backstage assemblage grew somewhat successful the archetypal weeks of the year, but concern assurance kept falling amid warnings of occupation cuts and rising inflation, according to a survey of firms

The UK's backstage assemblage has seen a humble uptick successful the aboriginal portion of the year, but concern sentiment continues to diminution with looming occupation cuts and escalating inflation, according to a survey of firms.

Economists are informing implicit imaginable "stagflation" successful the UK, wherever ostentation is connected the emergence but economical maturation and employment stay stagnant. The S&P Global flash UK composite purchasing managers’ scale (PMI) for January showed a flimsy betterment to 50.9 from December's 50.4, marking a three-month highest and surpassing economists' forecasts.

Despite this, businesses progressive successful the survey expressed concerns astir imaginable employment reductions owed to decreasing sales. These preliminary figures, which travel aft Chancellor Rachel Reeves' determination to hike employment taxes for companies successful the October Budget, volition apt substance worries astir sluggish economical maturation and a softening occupation market. A PMI people beneath 50 suggests contraction, portion supra 50 indicates expansion.

The flimsy summation successful enactment was chiefly driven by the work sector, which dominates the UK's backstage economy, whereas manufacturing saw a marginal decline. However, firms are inactive grappling with rising costs, with input outgo ostentation reaching its highest constituent since May 2023, and concern assurance has dipped for the sixth period successful a row.

Employment crossed the backstage assemblage has dropped, extending a signifier that began successful October past year, according to experts. Chris Williamson, S&P Global Market Intelligence's main concern economist, said: "The archetypal indicators of concern conditions successful 2025 adhd to the gloom astir the UK economy, with companies cutting employment amid falling income and concerns astir concern prospects.

"Inflation pressures person meantime reignited, pointing to a stagflationary situation which poses a increasing argumentation quandary for the Bank of England. While output maturation ticked higher, the betterment does small to determination the dial connected a speedometer which points to an system that is broadly flatlining.

"The subdued concern enactment seen successful January was accompanied by sustained downbeat concern optimism astir aboriginal prospects, the temper remaining the darkest seen for 2 years, and a further worsening of the request environment, arsenic reflected successful falling bid books."