Factory jobs cut at fastest pace since Covid as Labour’s anti-business Budget batters the

By HUGO DUNCAN

Updated: 17:01 EST, 3 March 2025

Manufacturers are cutting jobs at the fastest pace since the Covid-19 pandemic hit five years ago as Labour’s anti-business Budget batters the economy.

In its monthly health check on factories, S&P Global found ‘the steepest cut to employment’ in the sector since May 2020, with staffing levels falling in five of the last six months.

The report blamed ‘weak demand’ for UK goods and cost-cutting in response to the upcoming increase in the minimum wage and the £25billion National Insurance (NI) tax raid on employers.

S&P’s index of activity across the sector – where scores below 50 show decline – sank to a 14-month low of 46.9 as manufacturers scaled back production.

That was weaker than the eurozone’s 47.6 – meaning UK manufacturers have fallen behind those in the single currency bloc for the first time in nearly two years.

The report fuelled fears Britain is facing a new era of ‘stagflation’ – where the economy stagnates while prices climb – as the tax rises announced by Rachel Reeves in her October Budget take their toll.

Cuts: In its monthly factories health check, S&P Global found ‘the steepest cut to employment’ in the sector since May 2020, with staffing levels falling in five of the last six months

S&P said firms have responded to the increase in the minimum wage and NI – which will take effect in April – by ‘laying off temporary staff, reducing the hours of some employees, redundancies and the non-replacement of leavers’.

S&P’s Rob Dobson said the changes ‘are driving up inflation fears and intensifying the downward trend in staff headcounts’.

Tory business spokesman Andrew Griffith said: ‘With orders down, costs up, jobs lost and growth stalling, businesses know that everything is getting worse because of Labour’s economically illiterate decisions. Labour has no experience in business and it shows.’

A survey by lender Shawbrook found that 42 per cent of small- and medium-sized businesses believe the increase in NI contributions will hit business and a third plan to raise prices this year as a result.

Shawbrook’s Neil Rudge said: ‘Our latest research highlights some red flags following the Budget.

‘Many businesses will likely respond by raising prices or reducing staff-strategies that could have far-reaching implications for the broader economy.’

Food prices on the rise

Food prices have risen at their third-fastest monthly rate in a year, figures show.

The price of butter, cheese, eggs and bread all rose, according to the British Retail Consortium (BRC)-NIQ Shop Price Index.

The cost of other breakfast staples, including cereals and coffee, are also still soaring, taking food inflation to 2.1 per cent in February – a jump from January’s yearly growth of 1.6 per cent.

Fresh food prices are 1.5 per cent more than a year ago, also up on January’s 0.9 per cent.

Ambient food – which doesn’t need freezing or refrigerating – rose to 2.8 per cent from January’s 2.5 per cent.

DIY INVESTING PLATFORMS

Easy investing and ready-made portfolios

AJ Bell

Easy investing and ready-made portfolios

Hargreaves Lansdown

Free fund dealing and investment ideas

interactive investor

Flat-fee investing from £4.99 per month

Saxo

Get £200 back in trading fees

Trading 212

Free dealing and no account fee

Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.

Compare the best investing account for you

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Factory jobs cut at fastest pace since Covid as Labour’s anti-business Budget batters the

Food prices on the rise