UK business activity slumped to a 13-month low in November, as companies gave a “thumbs down” to policies announced in the Budget, according to a closely watched survey.
The S&P Global flash UK PMI composite output index, a measure of the health of the manufacturing and services sectors fell to 49.9 in November, from 51.8 in October.
The figure was the lowest since October 2023, and fell short of analysts’ expectations of 51.8. It stood below the 50 mark, indicating a majority of businesses reporting a decline.
Businesses reported falling output for the first time in just over a year, and cutbacks to staff for two months in a row.
The pound fell 0.6 per cent against the dollar to $1.251, its weakest level since May.
Chris Williamson, of S&P Global, said business optimism had slumped sharply since the UK’s general election.
“Companies are giving a clear ‘thumbs down’ to the policies announced in the Budget, especially the planned increase in employers’ national insurance contributions,” he said.
The drop in the PMIs suggests that real GDP growth is contracting in the middle of the fourth quarter, following a muted expansion of 0.1 per cent in the third quarter, according to Elias Hilmer, economist at the consultancy Capital Economics.
However, he noted that the survey did not capture the increase in government spending announced in the Budget, and that he doubted “GDP will be that weak”.
Hilmer said that tax rises “seem to have restrained some private sector activity” and that “the prospect of new tariffs imposed by the incoming [US] Trump administration may have weighed on activity too”.
This comes as separate data published by the Office for National Statistics showed that the quantity of goods bought in Great Britain fell 0.7 per cent between September and October, following a downward revised growth of 0.1 per cent the previous month.
This was the largest monthly fall since June, and was bigger than the 0.3 per cent fall forecast by economists polled by Reuters.
ONS senior statistician Hannah Finselbach said: “The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the Budget.”
Consumer confidence dipped sharply in September and October ahead of the Budget on October 30. However, in November it rebounded, rising 3 points to minus 18, according to data released on Friday by research company GfK.
Rob Wood, economist at the consultancy Pantheon Macroeconomics, said the rise in consumer confidence in November suggested an “uptrend in retail sales volumes”.
Kris Hamer, director of insight at the British Retail Consortium, a business association, called on the government to reconsider tax changes for retailers as they faced more than £7bn of additional costs in 2025.
This follows a rise in employers’ national insurance contributions, the minimum wage, and the introduction of new packaging taxes, which come into effect next year.
Last year, retail sales — an important indicator of consumer spending and economic growth — fell sharply over the festive period amid elevated prices and borrowing costs, as the UK tipped into a technical recession.
Samantha Phillips, partner at the management consultancy McKinsey & Company, said that for many retailers it was a “disappointing start to the golden quarter”, with focus shifting to “how to build momentum” in the run-up to the festive period.
