UK businesses are cutting jobs at the fastest rate in over four years, with upcoming Budget cost hikes set to accelerate the pace of layoffs. These redundancies are at an all time high according to a new survey. Despite the uptick in private sector activity, driven by the resilient services industry, data reveals that February’s staffing cuts were the sharpest since November 2020.

Higher payroll costs, rising wage pressures, and weak demand are pushing companies to reduce head-counts. The S&P Global flash UK composite purchasing managers’ index (PMI) recorded a slight dip to 50.5 in February from 50.6 in January. This suggests marginal growth but underscoring stagnation in the market.

Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that “business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs.” He warned of a “stagflationary environment” posing a growing challenge for the Bank of England.

Input cost inflation also rose for the fourth consecutive month, driven by salary hikes and suppliers passing on increased national insurance contributions. The rising costs, coupled with the need to offset wage increases due to minimum wage uplifts and national insurance changes, are contributing to intensifying job cuts.

In fact, employment fell at a rate not seen since the global financial crisis (excluding pandemic months), with one in three companies linking job reductions directly to Budget policies announced last October.

For investors and industry observers, this trend highlights the growing wave of distressed business activity in the UK. As rising costs and budget pressures push more companies into financial difficulty, sectors with weak demand and high payroll burdens may see increased insolvency risks. Monitoring these developments closely could provide valuable insights into which industries and regions may face the most significant challenges in the months ahead.