In the first few weeks of 2025 the UK’s private sector grew slightly and business confidence is plummeting warning there will be job cuts, and a survey of companies also says there will be rising inflation.
Economists are warning the UK is facing stagflation and this poses a “growing policy quandary for the Bank of England.”
The S&P Global flash UK composite purchasing managers’ index (PMI) reported a reading of 50.9 for January, compared to 50.4 in December, which is a three-month high and is above economists’ predictions.
The S&P global Flash poll said businesses are worried about falling sales and job cuts as the Chancellor’s Budget has led to a weakening jobs market as she raised taxes.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said, “The first indicators of business conditions in 2025 add to the gloom about the UK economy, with companies cutting employment amid falling sales and concerns about business prospects.
“Inflation pressures have meanwhile reignited, pointing to a stagflationary environment which poses a growing policy quandary for the Bank of England.
“While output growth ticked higher, the improvement does little to move the dial on a speedometer which points to an economy that is broadly flatlining.
“The subdued business activity seen in January was accompanied by sustained downbeat business optimism about future prospects, the mood remaining the darkest seen for two years, and a further worsening of the demand environment, as reflected in falling order books.”
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