KPMG UK is reportedly preparing to reduce its consulting workforce by 125 positions within the United Kingdom, citing declining demand and the presence of challenging economic circumstances. 

The company has initiated a consultation process aimed at trimming client-facing positions within its consulting division, as conveyed by the source. Additionally, the firm is reallocating certain employees to departments experiencing higher demand within the organisation. 

These reductions account for approximately 2.3% of the workforce within the unit.

KPMG joins the ranks of the Big Four firms implementing workforce reductions in the UK, although it is not the first to do so. Deloitte recently announced plans to eliminate 800 roles in the UK, while EY disclosed its intention to reduce staff by 5% within its UK financial services consulting division. 

Additionally, PwC has announced adjustments to pay increases and bonuses for a portion of its 25,000 employees in the UK.

So, what went wrong? 

As we delve into the topic of workforce reductions and a declining market in the UK, a pertinent question emerges: What factors have contributed to these developments, and what has led to the current situation in the United Kingdom? 

The private sector in the United Kingdom is presently facing a notable surge in job cuts, marking its swiftest pace of reduction since the global financial crisis more than a decade ago. In fact, recent data from the Office for National Statistics indicates that unemployment has risen by 0.8 percentage points in July compared to the previous month, reaching a rate of 4.3%. 

This trend can be attributed to a combination of factors, including a stagnant UK economy, the impact of higher interest rates, and the constricting effect of rising living costs.

Recent data from S&P Global has also raised concerns that the nation may be inching closer to an economic recession, particularly as the labour market displays signs of loosening. 

Furthermore, the private sector in terms of business activity is grappling with its most severe downturn since March 2009, excluding the impact of the pandemic. 

Companies have attributed this decline to a crisis centred around the cost of living and the surge in interest rates, both of which have led to a dampening of consumer demand. 

A closer examination reveals that private sector enterprises in Britain are shedding employees at the fastest rate since the pandemic outbreak and the depths of the financial crisis. This observation underscores the significance of the Bank of England's recent decision to halt interest rate hikes for the first time in nearly two years, as reported by Bloomberg.

Impact

An evident consequence of the rising interest rates and the cost of living crisis is the adverse impact on consumer demand, as revealed by the most recent data from S&P Global and the Chartered Institute of Procurement and Supply (CIPS). This data points to a significant decline in both Britain's predominant service sector and manufacturing output for the month of September. 

According to the latest composite Purchasing Managers' Index (PMI) released by S&P Global, the September reading plummeted to 46.8, down from August's 48.6. This represents the sharpest decline in output since January 2021, a period marked by the country's lockdown measures. 

The reading not only fell below economists' expectations but also pushed the private sector further into contraction territory. 

It is worth noting that earlier in the year, the International Monetary Fund (IMF) expressed concerns about the state of the UK economy, forecasting a performance that lags behind other advanced economies. This prediction stemmed from the ongoing impact of the cost of living crisis on households across the nation.

London job market at risk with UBS's Credit Suisse acquisition

The monumental acquisition of struggling Credit Suisse by its competitor, UBS, triggered a fresh challenge: a potential employment crisis for approximately 5,000 workers in the United Kingdom. The influx of numerous resumes into the job market has already begun, signalling concerning prospects for the already fragile British financial sector. 

Reuters reported that "Credit Suisse employees had been actively exploring alternative job opportunities in recent weeks," citing insider sources. Bankers at Credit Suisse are apprehensive about substantial workforce reductions following the UBS takeover, with estimates suggesting that as many as 10,000 jobs worldwide may be at risk.

What's driving working-age unemployment in the UK?

As reported by the BBC, the official figures for December 2022 indicate that approximately 1.3 million individuals in the UK were officially classified as unemployed, resulting in an unemployment rate of 3.7%. This rate is the lowest it has been since the 1970s. 

However, the unemployed population constitutes only a fraction of the approximately 10 million working-age individuals (aged 16-64) who are not engaged in paid employment. Of these, nearly nine million do not fall under the category of unemployed because they are not actively seeking job opportunities or available for immediate employment. 

The primary reasons for their non-participation in the workforce vary by age group. According to the Office for National Statistics (ONS), a significant portion of the 2.7 million inactive individuals under the age of 25 are students, and the majority of them do not express a desire for employment.

Crisis-stricken nations: Who else is on the list?

In May of this year, Germany, which ranks as the fourth-largest economy globally, entered a recession due to a decline in household spending caused by soaring inflation. A recession is typically characterised by two consecutive quarters of economic contraction. 

On September 1, 2023, data unveiled an unexpected economic downturn in Canada during the second quarter, with an annualized contraction rate of 0.2%. Furthermore, it is highly probable that economic growth remained stagnant in July.