UK Jobs Cut at Pace Seen After Financial Crisis, PMI Shows

The UK jobs market is experiencing a wave of cuts at a pace not seen since the 2008 financial crisis, according to the latest purchasing managers' index (PMI) data. The PMI, which measures business activity in the UK, has shown a significant decline in employment levels, with companies citing various factors such as Brexit-related trade disruptions, tax policy changes, and technological advancements as contributing to the job cuts.



Brexit has had a profound impact on UK trade and labour markets, with the EU-UK Trade and Cooperation Agreement (TCA) introducing additional administrative burdens and delays at the border. This has led to a decline in UK goods trading volumes with the EU, contributing to a fall in labour supply and weighing on the UK's long-run growth potential. The coronavirus (COVID-19) pandemic has also confounded the impact of Brexit on trade flows, but the available data suggests that Brexit has been a drag on UK trade and has contributed to a fall in labour supply (Source: ECB Economic Bulletin, Issue 3/2023).

Tax policy changes, particularly the introduction of steeper taxes on employers in Rachel Reeves's October budget, have added significant costs to businesses. For instance, Sainsbury's, a major retailer, has cited the tax increase as a factor in its decision to cut 3,000 jobs. The company estimated that the tax increase would add around £140m to its annual costs. This increased financial burden on businesses can lead to job cuts as companies seek to reduce expenses and maintain profitability (Source: Financial Times, 23 January 2025).



Economic uncertainty and reduced investment, exacerbated by the prolonged period of uncertainty about the EU-UK relationship following the Brexit referendum, have also contributed to job losses. The global recession and supply chain disruptions caused by the COVID-19 pandemic have further dampened investment, leading to reduced employment levels (Source: ECB Economic Bulletin, Issue 3/2023).

Technological advancements and automation have played a significant role in the recent job cuts, particularly in the retail sector. Sainsbury's, for instance, is replacing bakery staff with self-service bread-slicing stations, which is expected to improve the quality and consistency of its bread while reducing labor costs. This is an example of automation replacing human jobs in the retail sector.



In the long term, these policies may have significant impacts on the UK labour market. The increased costs and reduced trade may lead to lower employment levels, as businesses seek to cut expenses and adapt to new trading conditions. Wage stagnation may also occur, potentially leading to lower labour force participation and productivity. Skills shortages may arise as businesses struggle to find the talent they need to grow, and economic growth may be negatively affected by the combined impact of reduced employment, wage stagnation, and skills shortages.

In conclusion, the UK jobs market is experiencing a wave of cuts at a pace not seen since the 2008 financial crisis, driven by Brexit-related trade disruptions, tax policy changes, economic uncertainty, and technological advancements. These factors are likely to have long-term impacts on the UK labour market, including reduced employment, wage stagnation, skills shortages, and lower economic growth. To mitigate these negative effects, businesses and policymakers must invest in reskilling and upskilling the workforce and provide support to displaced workers.