Businesses give Reeves’s Budget a ‘thumbs down’

What did businesses really think of Rachel Reeves’s Budget? Today we have one of the first economic indicators reflecting their responses to Labour’s tax and spend changes – as well as global events like the US presidential election. The Purchasing Managers’ Index (PMI) fell below 50 in November, which suggests the private sector economy is now contracting after a year of expansion. 

Firms said that employment has been shrinking for two months and they are not replacing staff who leave voluntarily in order to offset the coming rises in the cost of workers. They also reported subdued customer demand – something shown in the retail sales figures Ross Clark examined this morning. 

This all means a question for the Bank of England: how to balance dealing with rising prices (services firms are already passing on the extra costs of higher wages) and weaker demand.