UK Business Activity Hits 13-Month Low

Leading economists in the UK have announced today that UK business activity has hit a new low for the first time in 13 months. Businesses up and down the country have reacted negatively to the budget announced on October 30th by Chancellor of the Exchequer Rachel Reeves. Considering the government’s aim to be seen as a party of growth, these numbers will come as something of a shock to the Prime Minister and his government ministers. 

November 2024 turned out to be the lowest in 13 months for business activity according to the S&P Global flash UK PMI composite output index. This index measures the health and activity of manufacturing and service sectors throughout the country. For reference, in October 2024, the index number was 51.8. Anything above 50 marks an increase in business growth and activity across multiple service sectors. Anything below 50 shows a declining trend. The figure for November 2024 was announced at 49.9, falling well below expectations.

What Does This Decline Actually Mean?

Businesses have reported falling output, meaning they have scaled back on the production of products and the offering of services to their customers. This, alongside a general trend of cutting back on employees for a second month in a row, has contributed to business activity decline.

At Real Business, we recognise that this is an uncertain time for business owners. We also recognise that it’s a scary time for employees, too. However, it’s worth pointing out that whilst business activity has declined, it is only declining slightly. This is common around budget announcements, however, as businesses wait to see what might affect them in the future and so pull back slightly on production and risk taking.

What Has Caused This Decline?

Leading economists will naturally debate the cause of the decline in November.

The common sense response is to say that the long wait and overcautiousness for the budget caused decline. This is probably likely. However, it is also an indication of businesses genuinely reacting negatively to the policies announced in the budget. One which seems to have caused particular issue amongst smaller businesses with less turnover and fewer employees is the higher employer national insurance contributions announced.

Even though the higher fees haven’t come into effect yet, businesses will naturally prepare for them, and letting staff go in order to cut costs is a possible response.

Is There A Reason To Be Optimistic?

Business activity fell, that is true, but it’s just one month out of a larger picture, so there’s no reason to panic just yet. Some reactions to the news have been knee-jerk, but in reality, things will almost certainly pick up in December as spending for the festive period increases and businesses prepare for a boom in business.

Whilst the budget will certainly have played a part in the downturn in business activity, there’s still reason to be optimistic. As a business owner, you should prepare for the policies announced in the recent budget, of course, but don’t allow them to cause concern. With the right preparation and business plan, your business can thrive and survive as the government makes changes to the business world.

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