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Growth in UK business activity edged up in January but job cuts continued as cost inflation accelerated, according to a closely watched survey pointing to a “stagflationary environment”.
The S&P Global flash UK PMI composite output index, which tracks activity in the private sector, rose to a three-month high of 50.9 points in January from 50.4 in December.
Economists polled by Reuters had expected the index to fall slightly to 50 points. Any reading above the 50 mark suggests that most businesses are reporting growth in activity.
Despite the rise in the composite index, employment levels fell for the fourth month in a row according to the survey, with businesses often linking this to rising cost pressures. S&P Global said that, with the exception of the pandemic period, the rate of job losses signalled by the PMI over the past two months was the highest since the global financial crisis in 2009.
Chris Williamson, economist at S&P Global Market Intelligence, said the survey’s results “add to the gloom about the UK economy, with companies cutting employment amid falling sales and concerns about business prospects”.
He warned that inflationary pressures had “reignited, pointing to a stagflationary environment which poses a growing policy quandary for the Bank of England”.
