(Bloomberg) -- The UK private sector slipped from solid growth to stagnation after the budget as a closely-watched survey showed firms gave a “clear thumbs down” to UK Chancellor Rachel Reeves’ fiscal plans.

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S&P Global said that its composite PMI plunged from 51.8 last month to 49.9 in November, falling narrowly below the 50 threshold separating growth and contraction. It was far worse than the 51.7 reading expected by economists.

It was the lowest reading in over a year, with the survey suggesting that a loss of confidence was driven partly by the payroll tax increase on businesses announced in the Oct. 30 budget. Firms’ expectations for activity in the year ahead was the most pessimistic since late 2022.

Gilts rallied as traders added to bets on BOE monetary easing, with investors fully pricing three quarter-point rate cuts by the end of 2025. The pound extended its slide against the dollar, falling as much as 0.8% to $1.2494, though it did still gain against the euro after worse-than-expected PMI data in the euro area.

The figures will be deeply concerning for Keir Starmer’s new Labour government, which has made reviving Britain’s tepid growth rates one of its main missions after winning the election on July 4. However, the survey is one of the clearest signs yet that Reeves’ first budget has only intensified businesses’ concerns.

Firms shouldered the bulk of £40 billion ($50 billion) of tax increases, and many are also facing higher costs after another hefty increase in the minimum wage.

“The November PMI is indicative of the economy slipping into a modest decline, with GDP dropping at a 0.1% quarterly rate, but the loss of confidence hints at worse to come - including further job losses -unless sentiment revives,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

“Companies are giving a clear ‘thumbs down’ to the policies announced in the Budget, especially the planned increase in employers’ National Insurance contribution,” he said.

The services sector, the growth engine of the UK economy, suffered a sharp slowdown this month, the survey revealed. The services PMI fell from 52 to 50, a 13-month low, while manufacturing output contracted at the fastest pace for nine months.