On a three month rolling basis, companies reported reducing staff numbers in every period since July last year. This marks the longest stretch of redundancies since the later stages of the pandemic in 2021.
The wave of job cuts broadly coincides with major changes to employer costs introduced last year. These include a £25 billion increase in employer National Insurance contributions, which took effect in April, alongside a 6.7 percent rise in the national minimum wage. The minimum wage is scheduled to increase again this spring.
The figures are likely to reinforce concerns that government policies have placed additional pressure on the labour market.
Recent official statistics show that the UK unemployment rate has risen to 5.2 percent over the latest three month period, compared with 4.4 percent a year earlier.
Young people appear to be the most affected. The unemployment rate for those aged 16 to 24 has climbed to 16.1 percent, the highest level in more than a decade. In response, the government has introduced a job subsidy scheme aimed at helping younger workers find employment.
Economists believe that developments in the labour market will play a crucial role in shaping the wider economic outlook this year.
Many analysts expect the Bank of England to consider cutting interest rates if wage growth slows and unemployment continues to rise.
However, global tensions have complicated the outlook. The recent conflict involving the United States, Israel and Iran has pushed oil and gas prices higher. Rising energy costs could drive inflation upwards while also slowing economic growth by increasing production costs and reducing household spending power.
Before the escalation of tensions in the Middle East, financial markets widely expected the Bank of England to reduce interest rates by a quarter of a percentage point to 3.5 percent at its next policy meeting on 19 March. Investors now estimate the probability of such a move at around 30 percent.
Separate data collected by the Bank suggests that businesses reported an average workforce reduction of 0.7 percent over the past year in February. This represents a larger drop than the 0.3 percent decline recorded in the previous month.
Despite the recent cuts, firms remain cautiously optimistic about the future. On average, businesses expect their workforce numbers to rise by 0.3 percent over the coming year, slightly higher than the 0.2 percent projection recorded in January.
Companies also reported plans to increase prices by an average of 3.3 percent over the next year, a slight fall from 3.4 percent previously.
Rob Wood, chief UK economist at Pantheon Macroeconomics, noted that expected price increases have now remained below 3.5 percent for two consecutive months, something that has not occurred since August 2021.
Earlier forecasts from the Bank of England suggested inflation could fall to around 2 percent in April due to lower household energy bills. However, the recent surge in gas prices linked to Middle East tensions may push inflation higher later in the year.
