UK Economy Stumbles as Hiring Plans Hit Lowest Since 2020 and Business Confidence Crashes
LONDON October 2, 2025 – The UK economy is showing clear signs of strain as firms cut jobs for the fourth consecutive month and hiring intentions fall to their weakest level since 2020, according to the Bank of England’s latest survey. Business confidence has also crashed to a record low, raising fears that Britain could face a winter slowdown just weeks before Chancellor Rachel Reeves unveils the Autumn Budget.
Bank of England Survey Shows Hiring Slowdown
The Bank of England’s “Agents’ Summary of Business Conditions” revealed that companies across sectors are scaling back recruitment. The report notes that most firms now plan to keep staff numbers flat or reduce headcount, breaking with the post-pandemic recovery trend.
Manufacturing firms are hit hardest, with the sector’s employment index firmly in contraction. Services firms are faring slightly better but are also reporting caution. The BoE said employment in the UK economy fell at an annual rate of 0.4% in the year to September, a reversal not seen since early 2021.
Economist Rob Wood of Pantheon Macroeconomics told Reuters: “These are the weakest hiring plans since the depths of the pandemic. It signals companies are nervous about costs, demand, and the uncertain policy environment.”
Business Confidence Hits Record Low
The Institute of Directors (IoD) reported that its confidence index sank to –74 in September, the lowest since records began in 2016. Executives cited rising costs, weak demand forecasts, and ongoing political uncertainty as reasons for the collapse in sentiment.
Kitty Ussher, chief economist at the IoD, said: “Directors are deeply concerned about the cost of doing business. Inflation, taxation and weak demand are weighing heavily on investment and hiring decisions.”
Inflation and the Bank of England’s Dilemma
Inflation remains a central headache. Companies surveyed by the BoE expect consumer price growth of around 3.5% over the next year, keeping inflation well above the 2% target. The central bank itself expects CPI to run at 4% in September.
Deputy Governor Catherine Mann warned earlier this week that the UK faces a “high persistence scenario” for inflation. This complicates decisions on interest rates, as the BoE must balance the risk of cutting too early against the danger of choking off growth if rates stay high.
Tesco and the Retail Sector Raise Alarm
Tesco CEO Ken Murphy used the company’s half-year update to warn that further tax rises could cripple investment. “Enough’s enough on business taxes,” Murphy told the Financial Times, adding that retailers cannot carry the weight of higher operating costs without reducing jobs or raising prices.
Tesco’s caution reflects a wider concern among retail and wholesale firms. While Christmas trading is traditionally a lifeline for the sector, high household bills and fragile confidence may limit consumer spending.
Regional Hotspots Offer Some Resilience
Despite the grim national outlook, a NatWest report identified Manchester, Leeds and Oxford as “business hotspots” showing stronger mid-market growth. These regions are benefiting from tech clusters, SME scaling, and investment in advanced industries.
Analysts say these hotspots could help cushion the broader UK economy, though they may not fully offset declines in manufacturing and retail.
Markets React Cautiously
The FTSE 100 was little changed in morning trading, with modest gains in consumer staples offset by losses in industrials. Sterling dipped slightly against the dollar, reflecting investor caution around the UK’s growth outlook. Traders are closely watching for signals from the BoE and any fiscal announcements from the Treasury.
What This Means for the Autumn Budget
The Autumn Budget, due in November, will be a critical moment for Chancellor Rachel Reeves. Businesses are lobbying for targeted tax reliefs, investment incentives, and measures to ease labour shortages. Economists say the government must strike a delicate balance: supporting growth while maintaining fiscal discipline and credibility.
If hiring continues to contract and business confidence remains near record lows, pressure will mount on Reeves to deliver a pro-growth budget. Failure to act, analysts warn, could tip the UK economy closer to stagnation in 2026.
Outlook
The UK economy enters October under pressure: hiring intentions are at their weakest since 2020, confidence is at record lows, and inflation remains stubbornly high. While regional bright spots and resilient consumer staples provide some support, the overall picture is of an economy losing momentum.
How the Bank of England and Treasury respond in the weeks ahead may determine whether this slowdown becomes a short-term wobble or the start of a more sustained downturn.
Fidelis: For Those Who Still Value Truth
Fidelis News is free to read, but not free to make. If you value independent journalism, please consider supporting us:
By Fidelis News Staff – October 2, 2025
