BoE governor: rising evidence of slack in the labour market
The governor of the Bank of England has warned UK businesses that Britain’s jobs market may be easing.
In his speech to the BCC’s annual conference, Andrew Bailey says he is hearing “a bit more evidence” that firms are adjusting pay and employment levels following the rise in employer National Insurance Contributions announced in the last budget.
Bailey says:
In recent months, the evidence that slack is opening up has strengthened, especially in the labour market. But there remain uncertainties around the overall balance between supply and demand in the economy as well as the remaining inflation persistence in the system.
The governor cites the latest labour force statistics, which shows subdued employment growth is subdued, and “several indicators of labour demand and hiring intentions have softened”, including a fall of over 100,000 in the number of payrolled employees in May.
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The governor of the Bank of England has warned there are growing signs that the UK jobs markets is slowing as employers respond to higher national insurance contributions (NICs) by cutting hiring and offering weaker pay rises.
Andrew Bailey also told the BCC’s annual conference today that growth in the economy is likely to “moderate” this year, after a pacy start to 2025.
His comments came shortly before new data showed America’s economy shrank faster than previously thought in January-March, due to the surge of imports to beat Donald Trump’s trade wars.
Prime minister Keir Starmer acknowledged the tax burden placed on businesses during his speech to the BCC this morning, as firms urged the government not to impose further tax rises.
In other news…
A report into the Office for National Statistics has identified ‘cultural’ failings which led to its problems producing reliable data, and recommending splitting the top job running the ONS.
Energy secretary Ed Miliband has declined to support a plan to build the world’s longest subsea power cable to bring North Africa’s renewable energy to British homes and companies.
Shell has said it has “no intention” of making an offer for the rival fossil fuel company BP after speculation it had been planning a £60bn takeover, ruling out a formal approach for the next six months.
The former Barclays chief executive Jes Staley has lost a legal challenge against the UK financial regulator, leaving him banned from the City for life for misleading the watchdog over his relationship with the sex offender Jeffrey Epstein.
The dollar has fallen to a three-year low following a report that Donald Trump is considering bringing forward the announcement of his choice to succeed the Federal Reserve chair, Jerome Powell.
The selloff pushed the pound up by almost a cent to $1.375, its highest level in over three years.
ShareReview finds cultural failings at UK statistics office
The Devereux Review of the Office for National Statistics has found cultural problems that ultimately contributed to the statistical problems that have plagued the organisation.
They fall into three areas:
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a “commendable interest in both new approaches to statistics”, which led the ONS to de-prioritise the crucial task of delivering core economic statistics of sufficient quality to guide decision making
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A weak system of planning and budgeting, leading to ONS staff not having the resources they needed.
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A reluctance, at senior levels, to hear and act on difficult news. The ONS aimed to be “radical, ambitious, inclusive, and sustainable” – which it lived up to in the Covid-19 pandemic when other activities were de-prioritised. However, the Review adds, “several people suggested that the list of values was missing “realistic””.
The review says there has been:
…a reluctance on the part of some to take at face value the warnings which have been raised, apparently preferring instead to categorise those making the warnings as lacking in accountability.
This categorisation seems to me to be without foundation, and it has undoubtedly made life difficult for many senior people working at ONS who are concerned about the quality of population and economic statistics. I am not surprised that so many, experienced, senior leaders have chosen to leave.
Updated at 11.37 EDT
ONS to spend £10m fixing its problems
A review into the UK’s troubled statistics body has recommended splitting its top job.
The Devereux Review of the Office for National Statistics’s performance and culture has found that there are various “deep-seated” issues at the ONS.
Sir Robert Devereux, a retired civil servant, has recommended that these issues would best be addressed by temporarily splitting the role of National Statistician in two. That would create a new role of ONS Permanent Secretary.
This new Permanent Secretary position could be handed to someone with a track record of leading, and turning around, an operational business, Devereux says ,adding:
I suggest temporary separation since, with the more effort to develop evident talent within the Government Statistical Service, I think it might well be possible to re-combine the roles in due course, once the organisation’s core business is back on a more stable footing.
The role of National Statistician is currently unfilled, as Professor Sir Ian Diamond retired with immediate effect, on account of ill health, during the Review.
The ONS’s operations have been criticised, after its surveys were hit by falling participation rates among the public, leading to questions about the validity of its data.
Today acting National Statistician Emma Rourke says:
“We welcome Sir Robert Devereux’s report and fully acknowledge the issues he has highlighted. This represents a turning point for the ONS as we commit to implement the recommendations and reset towards a culture that embraces feedback and challenge.
The ONS has also published a new plan for economic statistics, under which it will invest £10m to improve its core economic and population statistics.
The ONS has also admitted that improving these statistics will take collective effort, adding:
In some cases, this may mean revising published figures or historical series. That is not a sign of failure, but of a statistical system willing to evolve, led by evidence, and open about how it improves.
We will work closely with users to ensure revisions and breaks in series are well managed, with support provided to users.
ShareBadenoch: UK has too many ‘takers’
Kemi Badenoch then argues that the “fundamental question” facing the UK is whether it is “whether we are for the makers or for the takers”.
Badenoch tells the British Chambers of Commerce that this boils down to:
Whether we are for those who work hard, who get on, who build businesses, who make things happen, whether it’s a plumber or a nurse, or those who don’t. And I know whose side I’m on.
Turning to the government’s political crisis over its welfare reform bill, Badenock says:
Our debt interest is well over 100 billion pounds a year. Welfare spending is out of control. The state is bloated. Productivity has flatlined, and the economy is stuck in first gear. Our country is living beyond its means.
Calling for “a total different approach”, Badenoch says things need to be made easier for those ‘makers’.
Echoing George Osborne’s attack in 2012 on families on benefits who live with “the blinds are down” as neighbours head to work, the Tory leader says:
Currently this country has too many people who are taking, whether it is those who sit at home with the curtains drawn while others go out to work, or those who skip the queue and arrive here illegally, only to be given privileged access to social housing, the NHS and our generous welfare system.
[On the lattter point, the House of Commons Library explains that “Migrants in the UK on visas, illegally or seeking asylum are usually ineligible for welfare benefits and social housing”.]
Our Politics Live blog has all the latest details on the welfare bill row:
ShareBadenoch: We’ve had economic change for the worst
Opposition leader Kemi Badenoch is now addressing the BCC’s annual conference, and laying into the government’s record.
Badenoch tells business leaders that one reason her party lost the election last July is that they were no longer trusted, and also that they got enough things wrong that people wanted change.
She then criticises Keir Starmer’s economic record over his first year, saying:
After 12 months of Labour in office since July, we’ve had inflation higher, unemployment up, growth halved.
I mean this is change, but it is change for the worse. And it didn’t have to happen.
[factcheck: At 3.4% last month, inflation is higher than last July, when it was 2.2%. But, it’s still short of the 11.1% hit in October 2022.
On growth, Badenoch may be referring to the Office for Budget Responsibility’s forecast for growth in 2025, which was halved in March to 1.0%. It blamed a “more challenging and uncertain backdrop” for this cut.
And the unemployment rate has indeed risen, to 4.6%, the highest since July 2021.]
Badenoch blames the goverment’s increase in national insurance, calling it a “jobs tax” that is killing jobs, adding:
It is making it impossible for businesses to grow. And then we see that family businesses, which form the backbone of many of our communities, have been hit with increased taxes.
A gauge of trade activity is risen in the last quarter, amid the scramble to ship goods before new US tariffs come into effect.
The World Trade Organization’s Goods Trade Barometer rose to 103.5, up from 102.8 in the three months to March
But the WTO is concerned that there may be a slowdown later this year, saying:
“The decline in export orders and the temporary nature of frontloading suggest that trade growth may slow in the months ahead.”
ShareMiliband refuses support for subsea cable to bring power from Morocco
Jillian Ambrose
Ed Miliband has rejected plans put forward by the former boss of Tesco to build the world’s longest subsea power cable to bring North Africa’s renewable energy to British homes and companies.
The energy secretary has ruled out granting Sir Dave Lewis a support contract to guarantee stable payments for the electricity delivered by the Xlinks high-voltage cable project from wind and solar farms in Morocco.
Lewis and a string of high profile investors had hoped to bury a 4,000km cable along the seabed to carry up to 8% of Great Britain’s electricity from renewable energy and battery projects in the Tantan province to the Devon coast in under a second.
But after five years of lobbying the government for support for the world-first energy project the energy secretary rejected the plans amid concerns over whether the project would deliver value for money, and wider economic benefits for UK supply chain firms.
There were also concerns over the geopolitical implications of relying so heavily on energy from a foreign country following four years of upheaval on the Russia-Ukraine border and in the Middle East.
Lewis told the Guardian last year that Xlinks – which is backed by French energy company TotalEnergies, the UK’s Octopus Energy, and its founder Greg Jackson – hoped to secure a contract which pays between £70 to £80 per megawatt hour (MWh).
This sum would be less than the deal struck with the developers of the Hinkley Point C nuclear power plant, and in line with the expected cost of future offshore wind farms.
But after spending around £100m developing the project Lewis and his backers are expected to try to find a new route to market by setting up power purchase agreements – known as PPAs – directly with major energy buyers.
Back in the UK, the competition regulator is considering whether Boeing’s deal to acquire Spirit AeroSystems could affect competition.
The deal was agreed almost a year ago, with Boeing paying $4.7bn for aerospace supplier Spirit, which makes the body of the 737 Max jet,
The CMA is inviting comments from parties by 15 July. It wants to find out if the deal will result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
ShareRecurring US jobless claims rise to highest since November 2021
America’s jobs market also appears to be slowing!
Recurring applications for US unemployment benefits have risen to the highest level since November 2021, a sign that more Americans are staying out of work for longer.
The number of ‘continuing claims’ for unemployment support rose to 1,974,000 in the week to 14 June, an increase of 37,000 from the previous week’s revised level. This is the highest level for insured unemployment since 6 November, 2021 when it was 2,041,000.
The continuing claims figure is a proxy for the number of people receiving benefits, so this indicates a slowdown in the US jobs market.
The number of new claims for jobless support dropped last week, though, to 236,000, a decrease of 10,000.
ShareUS economy shrank more than thought in Q1
Newsflash: The US economy shrank more rapidly than previously estimated in the first quarter of this year, as Donald Trump’s tariff threats widened the US trade gap.
The U.S. economy contracted at a 0.5% annualized rate in Q1, more than the 0.2% rate of decline estimated a month ago, the Bureau for Labor Statistics has reported.
That’s the equivalent of a 0.125% quarter-on-quarter contraction.
The BLS says:
The decrease in real GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decrease in government spending. These movements were partly offset by increases in investment and consumer spending.
ShareBoE governor: signs that wage growth is slowing
Bailey also warned there is “still some way to go” in the process of bringing wage growth down.
Such a reduction is necessary, he argues, to create “a sustainable disinflation” in the UK economy.
Governor Bailey says there are signs that pay growth is slowing, explaining:
Annual private sector regular average weekly earnings (AWE) growth was 5.1% in the three months to April, down from 5.9% in the three months to January, having risen in the second half of last year.
That said, AWE measures are reducing much as we have been expecting, and momentum in the latest data has softened.
The latest data on pay settlements and pay expectations point to a significant decline in wage growth in the year ahead. The latest intelligence from the Bank’s Agents continue to suggest average pay settlements for 2025 of 3.5 to 4.0%, closer to levels consistent with the inflation target.
Andrew Bailey also indicated that the increase in employer NICs rates, which began in April, could be pushing up prices in the shops.
He tells the BCC’s conference that food price inflation, which rose to 4.4% in May, is also on the Bank’s “watch list”, adding:
The prices of meat, chocolate and non-alcoholic drinks have gone up the most, consistent with higher wholesale prices for beef, cocoa beans and coffee. These price increases are to an extent idiosyncratic, with reports of reductions in cattle herds and climate-related disruptions to coffee and cocoa production.
But our Agency intelligence also highlights labour costs and costs related to new packaging regulation as wider factors at play. And, like energy prices, food prices are salient to consumers. We have to make sure that these increases do not feed through to second-round effects either.
ShareBoE governor: rising evidence of slack in the labour market
The governor of the Bank of England has warned UK businesses that Britain’s jobs market may be easing.
In his speech to the BCC’s annual conference, Andrew Bailey says he is hearing “a bit more evidence” that firms are adjusting pay and employment levels following the rise in employer National Insurance Contributions announced in the last budget.
Bailey says:
In recent months, the evidence that slack is opening up has strengthened, especially in the labour market. But there remain uncertainties around the overall balance between supply and demand in the economy as well as the remaining inflation persistence in the system.
The governor cites the latest labour force statistics, which shows subdued employment growth is subdued, and “several indicators of labour demand and hiring intentions have softened”, including a fall of over 100,000 in the number of payrolled employees in May.
ShareBailey: UK economy likely to grow at a more moderate pace
Bank of England governor Andrew Bailey then warns the British Chambers of Commerce that UK growth is likely to slow to a “more moderate pace” over the coming quarters.
Bailey explains that the 0.7% growth in January-March was stronger than expected, but partly due to one-off factors.
He says:
First, the unexpected strength in the first quarter was driven by strong outcomes for volatile components of GDP in the monthly figures for March. This was possibly a result of front-loading of activity ahead of increases in Stamp Duty Land tax and Vehicle Exercise Duty, and with a temporary boost to trade ahead of the imposition of new tariffs on exports to the United States. Consistent with this, monthly GDP contracted by 0.3% in April.
Second, looking at the expenditure components of GDP, while business investment was strong in the first quarter, businesses tell us that heightened uncertainty and a weak demand outlook are weighing on investment intentions. That could point to slower investment over coming months – although how it pans out remains to be seen, and again I was encouraged by what the Prime Minister had to say earlier.
And, while real household incomes have risen quite strongly, consumption has not followed suit. The household savings rate, in other words, has gone up – and to quite a high level compared to past experience. We have not seen evidence yet to indicate any decline in the saving rate, with the implications that carries for consumption.
Updated at 08.13 EDT
The governor of the Bank of England is warning UK businesses that they are at risk from “elevated global uncertainty”.
Speaking to the BCC’s annual conference in London today, Andrew Bailey says:
There is a lot going on in the world around us. Escalation of the conflict in the Middle East drove up energy prices in the past few weeks but in the last few days they have come back down again. Global trade policies remain unpredictable. These are things that weigh on the global economy.
Bailey then warns that the UK economy’s potential growth has slowed in recent decades – from an estimate of over 2.5% in the period from 1990 to the financial crisis, to just 1.25% since.
Raising the potential growth rate of the economy is one of the most important challenges facing us as a society today, Bailey insists, saying this is the only way to sustainably lift the standard of living.
Bailey also gives Keir Starmer some credit, saying:
Growth also requires strong institutions and public policies to provide a supportive environment. I welcome the Government’s strong commitment to growth and its initiatives to strengthen the UK’s relations to our trade partners.
The Prime Minister’s messages this morning were very positive and welcome news, setting out a course that can unleash further investments that will make a real difference to the UK economy.
ShareJes Staley fails to overturn ban for misleading watchdog over Epstein links
Newsflash: Jes Staley, the former CEO of Barclays, has failed to overturn a ban on holding senior management roles in the financial services industry.
Staley has lost a legal challenge against the UK regulator, leaving him banned from the City for life for misleading the watchdog over his relationship with the convicted sex offender Jeffrey Epstein.
Here’s the full story:
ShareBCC: The reality of British business is hard, relentless and knackering
The British Chambers of Commerce were also reminded about the financial burden which the Starmer governent has put on businesses.
BCC director general Shevaun Haviland told today’s conference that she hears “frustration, irritation and exasperation” from companies around the country, as the economy continues to struggle.
She added:
The reality of British business is hard, it’s relentless, it’s knackering, it’s being endlessly creative, its seven days a week….and it’s absolutely essential for the UK’s future prosperity.
So, it’s not been helped by the Treasury demanding that business plug the black hole in its finances.
Haviland added that the size and scale of the rise in National Insurance Contributions took businesses by surprise; it has driven down consumer confidence, and contributed to a third of companies either making staff redundant or considering it.