UK private-sector jobs drop for 12th straight month as public sector expands, PMI shows

Private-sector employment in Britain has fallen for the 12th consecutive month, the longest streak since the pandemic, according to a monthly PMI survey from S&P Global. The data underscore a widening divide between a shrinking private sector and a public sector that continues to expand under the Labour government, complicating the outlook for jobs and growth.

In September, the PMI indicated private-sector activity grew at the slowest pace in four months, with a reading of 51.0, down from 53.5 in August. The survey also points to roughly 50,000 private-sector jobs lost over the three months to September, a statistic that reinforces the sense of persistent weakness in hiring. The latest figures show firms have reduced headcount every month since October of last year, when Chancellor of the Exchequer Rachel Reeves unveiled her initial budget.

Excluding the Covid period, such a prolonged decline in private-sector employment has not occurred since the financial crisis of 2008-09. By contrast, public-sector payrolls have risen, with around 75,000 more roles since Labour took office, the latest official figures show, taking the public count to its highest since 2011.

Analysts say the combination of softer activity and mounting hiring costs is a drag on the private sector. Chris Williamson, chief economist at S&P Global Market Intelligence, described the PMI release as signaling a weakened growth backdrop, noting a “litany of worrying news” that includes softer overseas trade, fading business confidence and ongoing job losses. He warned that the picture points to growth that is “almost stalling” and could worsen if domestic momentum fails to pick up.

Separately, S&P Global Ratings offered a more upbeat short-term nod to the economy, upgrading the UK’s growth outlook for the year from about 0.9% to 1.2%. Rating analysts attributed the revision to a stronger-than-expected start to the year, with firms front-loading exports to the United States ahead of tariff changes anticipated during the year. The upgrade came despite ongoing concerns about a sluggish job market and investment headwinds.

In the corporate sector, executives have sounded steady cautions about the climate for investment. David Ricks, chief executive of Eli Lilly, warned that the United Kingdom risks missing out on the development of new drugs if policy and funding environments do not improve, highlighting the broader concern among multinational firms that the UK’s research and innovation ecosystem could be affected by political and fiscal decisions.

Policy context remains a talking point in markets. Critics, including Conservative business voices, have pointed to Reeves’s employer National Insurance contributions hike as adding to the cost of hiring and expanding the tax burden on firms at a time when growth is already delicate. Andrew Griffith, the party’s business spokesman, tied the private-sector job losses to Labour’s policy choices, arguing that productive private-sector employment has contracted for a year while the public sector continues to expand.

Taken together, the data paint a picture of a UK economy navigating a challenging policy regime and a mixed external environment. While public-sector employment strengthens the state apparatus in some measures, the private sector faces headwinds from taxation, hiring costs and softer demand, complicating the task of sustaining job growth and investment as the country moves through the current fiscal cycle.