Forget rate cuts. Forget the soft-landing narrative. UK service-sector firms have just cut jobs for the 19th consecutive month — every month since Reeves’ first Budget — and the latest PMI says cost inflation is at its highest since November 2022. The maths is doing one thing only: handing the Bank of England a reason to HIKE, not cut. The employer NICs hike that started this is now eighteen months old.
The 19-month job-cut streak
The survey covers around 650 service-sector companies and is one of the most-watched real-time barometers of the UK labour market.
S&P Global’s purchasing managers index this morning logged the 19th straight month of net staffing reductions in the UK’s dominant services sector. The streak runs unbroken every month since October 2024 — the month of Chancellor Rachel Reeves’ first Budget. The survey covers around 650 service-sector companies and is one of the most-watched real-time barometers of the UK labour market.
The trigger, per researchers: higher payroll costs and productivity gains forcing employers to rethink hiring. Translation — Reeves’ employer NICs hike, the wage cost increase that has dominated UK services-sector cost calls for over a year, has now produced 19 consecutive months of office-floor headcount reductions.
There is one mild silver lining. April’s employment reading was the strongest level since November 2025 and the second strongest since November 2024. The pace of cuts is easing. The direction is not.
For context, the UK services sector dominates the country’s private-sector workforce. A staffing decline of this length in this segment is the labour-market story of the cycle — not a niche reading from a thin survey. The S&P Global panel is the closest the country gets to a real-time employment thermometer for white-collar London and the wider UK office economy.
The growth paradox
Here is where the data turns awkward. Business activity STILL increased in April. The services PMI came in at 52.7, above March’s print and well above the 50-figure neutrality mark. The composite PMI, which folds in manufacturing and construction, jumped from 50.3 in March to 52.5 in April.
The UK economy is shedding labour but not output. That is a productivity story on paper — and a temporary-distortion story in practice.
Pantheon Macroeconomics chief UK economist Rob Wood cautioned: “Some of the output gains will be temporary, resulting from firms bringing forward orders ahead of future supply disruptions.” He flagged that “Backlogs of work fell by the most in six months” and warned about Easter seasonal-adjustment effects. His base case: the April PMI is consistent with around 0.2 per cent quarterly growth in the second quarter, possibly approaching 0.3 per cent.
A modest growth print, then. But the headline that matters is not growth — it is what comes next.
Cost inflation is the bomb
Input price inflation in the PMI survey has just hit its highest level since November 2022. More than half of respondents reported an increase in costs over April, with fuel surcharges and wage pressures combining to push the burden up. The overall inflation measure also came in at its highest level since January 2023.
That combination — rising input costs across more than half the surveyed companies, plus wage pressure that is now structural — strongly suggests firms will pass costs through to consumer prices. Headline UK CPI has already been trending up; this PMI release pencils in another leg of pass-through pressure.
Optimism about activity for the year ahead did edge up — services firms are not panicking. But for the Bank of England, the relevant data points are the cost ones, and those are flashing the wrong colour for any rate-cut argument that still relies on falling inflation.
Why the Bank of England now leans hike, not cut
Thomas Pugh, chief economist at RSM, put the policy read directly: “For the Bank of England, rising inflation indicators along with resilient output balances, if they are maintained over the next few months, makes future rate hikes more likely.”
The conditional is critical. If costs and output hold these levels, the BoE’s calculus inverts. Pugh tempered the take with a longer-term read: the Iran crisis ultimately pushes unemployment higher and growth lower, meaning any tightening cycle is likely “short and shallow.” But the immediate risk has flipped — markets that had been pricing rate cuts are now pricing the chance of a hike.
For Reeves, that is the worst-possible Budget read. Her fiscal arithmetic was built around a rate-cut glide path; this PMI release plants questions on every line of that assumption. For mortgage holders coming up for renewal in 2026, the same shift filters through directly to refinance rates.
The May MPC meeting is suddenly the live event of the calendar.
The Bottom Line
Don’t expect rate cuts any time soon. The combination of 19 months of job cuts, services PMI at 52.7, and inflation at 2022 highs is the textbook signal for the Bank of England to HIKE, not ease. Reeves needed cuts to stabilise the Budget. She is going to get the opposite. Watch the May MPC closely — the framing has flipped.
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FAQ
Why have UK service-sector firms cut jobs for 19 straight months?
The S&P Global PMI survey of around 650 services companies has shown net staffing reductions every month since October 2024 — Reeves’ first Budget. Researchers cite higher payroll costs (in particular the employer NICs hike) and productivity gains forcing employers to rethink hiring rather than expand teams.
Why is the BoE more likely to HIKE rates after this PMI release?
Rising input cost inflation at its highest since November 2022 combined with resilient business activity (services PMI at 52.7) gives the Bank of England the wrong signal for cuts. Thomas Pugh at RSM said the latest data makes “future rate hikes more likely” if conditions persist over the next few months.
How can growth hold up if jobs keep being cut?
Business activity readings reflect output and order-book strength, not headcount. Pantheon’s Rob Wood cautioned that some of April’s gains may be temporary — firms pulling forward orders ahead of supply disruptions, plus Easter timing distortions and the sharpest fall in backlogs in six months.
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