UK services sector job cuts extended into a 23rd consecutive month in August, with businesses maintaining hiring freezes and trimming headcounts in response to rising costs. The figures come from S&P Global‘s Purchasing Managers Index (PMI) for services, which showed the sector is now enduring its longest unbroken stretch of workforce reductions since records began in 1996.
The PMI headline reading came in at 52.5 in August, up from 52.1 in July. Any reading above the neutral 50.0 threshold indicates growth in the sector, so activity is still expanding, but the jobs picture tells a different story. Rising fuel, transportation and wage bills have pushed up operational costs, and firms have responded by trimming payrolls or halting recruitment. Some businesses have turned to automation in an attempt to lift productivity.
Export sales add to the pressure on UK services
Beyond the domestic jobs picture, external demand is also struggling. Export sales declined for a sixth consecutive month in August, according to Trading Economics, pointing to persistent weakness in overseas appetite for UK services. The combination of softening foreign demand and elevated domestic costs leaves firms with little room to rebuild their workforces even as overall activity inches upward.
Tim Moore, economics director at S&P Global Market Intelligence, said the pace of job losses had slowed to its lowest rate since October 2025, helped by a modest recovery in new business and improved domestic confidence. ‘Service providers are increasingly optimistic about the year ahead business outlook, with confidence levels now close to those seen just prior to the Middle East conflict,’ Moore said. He added, however, that business activity growth projections were ‘still subdued in comparison to long-run trends amid lingering worries about inflationary pressures and geopolitical tensions’.
The cost burden on businesses extends beyond what global conditions alone can explain. A typical mid-sized UK firm is forecast to be paying roughly £827,000 more a year than it was in 2016 as a direct consequence of domestic policy decisions, according to a business cost calculator launched by the British Chambers of Commerce. That figure underlines why many firms have been reluctant to add headcount even when order books are recovering.
Budget day looms for Burnham and Healey
Prime Minister Andy Burnham and Chancellor John Healey face a test in sustaining any recovery in confidence as the new government’s first Budget approaches on 28 October. The fiscal backdrop is tightening. The US-Iran war has pushed oil prices sharply higher, triggering widespread fears of a renewed inflation spike and sending bond yields climbing across global markets.
Rising gilt yields are squeezing the Chancellor’s room for manoeuvre. Researchers at Pantheon Macroeconomics have suggested that higher yields have cut fiscal headroom to just £13bn, below previous forecasts of around £15bn before a recent sell-off in bond markets drove up borrowing costs. The Office for Budget Responsibility (OBR) is expected to revise upward its projections on debt interest payments in 2030 as a result. The UK government is currently set to spend about £135bn servicing its debt over the next five years.
Healey’s commitment to funding day-to-day spending through tax receipts, a rule inherited from his predecessor, has sharpened speculation that further tax rises are coming. Economists have warned that ‘large tax hikes are on the way’ as the Chancellor looks to meet demands for more cost of living support, increase defence spending and preserve fiscal headroom.
For businesses in the services sector, the Budget on 28 October is therefore as much a threat as an opportunity. If higher employer taxes follow, the cautious hiring behaviour that has driven UK services sector job cuts for nearly two years may prove difficult to reverse even as PMI readings edge higher.
