Closing summary: Labour flexible working policy starts four-day week debate
Is the UK on the brink of a four-day working week becoming the norm? Not yet. However, the new Labour government has acknowledged that its ideas of “flexible working” include compressed hours – working 100% of the hours, but in four days ather than five.
Labour minister Jacqui Smith said that compressed hours could benefit UK productivity by encouraging more people – such as parents or carers – into the workplace.
Ben Willmott, head of public policy for the CIPD, the professional body for HR, said the government should assess the effects of the right to request flexible working that was introduced in April before pushing ahead with more changes. He said:
Flexible working arrangements such as compressed hours, job sharing and term-time working can help people balance their work and home life commitments, while also supporting employer efforts to recruit and retain staff. However flexible working has to work for both the business and workers if it’s to be sustainable and this needs to be recognised in any changes to regulation.
Compressed hours are different to the actual four-day week: doing 80% of the standard hours, but crucially with no loss of pay. But the willingness of the Labour government to even say the words “four-day week” is a marked change from the Conservatives, who tried to block any shift towards a shorter working week for public servants.
There still remains the question of how changes to encourage flexible working will work in practice.
Charlie Thompson, employment partner at Stewarts, a law firm, said:
Employees in the UK already have the right to request flexible working, which includes requesting a four day week, so it’s not yet clear what this “new” law will entail. One possibility is for the government to make it more difficult for employers to refuse such requests, because at present it is quite easy for them to do so.
Felicity Baker, co-founder of Ultimate Resilience, a consultancy on mental health in the workplace, said that she had worked with an IT company that trialled the four-day week last year.
We discovered that giving employees the option of time back with no loss of pay benefited their work/life balance, mental health and overall wellbeing. They never went back.
However, introducing flexibility also has potential to undermine team relationships and derail business objectives if not handled carefully. Highgate found that keeping staff at the centre of planning, by providing training and a buddy system, was crucial to ensure they were well supported and to make changing work patterns sustainable.
In other business and economics news:
Eurozone inflation fell this month to its lowest since June 2021, adding to the case for the European Central Bank (ECB) to cut interest rates in September.
The Federal Reserve’s preferred measure of inflation stayed steady at 2.6% year-on-year in July, as the US central bank prepares to cut interest rates.
Keir Starmer has been warned against caving in to pressure to water down a ban on exploitative zero-hours contracts.
UK house prices dipped in August, marking the first fall in four months, even as the annual rate of growth in the cost of a property remains at a high of more than 18 months.
The social media platform X faces the prospect of a ban in Brazil after failing to meet a court-imposed 24-hour deadline to appoint a legal representative in the country.
Shell is to cut hundreds of jobs from its oil and gas exploration operation in the latest move by the chief executive, Wael Sawan, to slash up to $3bn (£2.3bn) in costs.
Sales of Oasis music have soared since the band announced it was reforming for a series of live gigs next summer, with vinyl and CD sales up more than 500% in the past week at HMV.
You can continue to follow our live coverage from around the world:
In the UK, the government is seeking to make ‘fewer places where you can smoke’
In Europe, high-profile politician Sahra Wagenknecht is sprayed with liquid as Germany gears up for key state elections
In the US, the Harris campaign launches an abortion-focused bus tour as polls show momentum against Trump
In our coverage of the Middle East crisis, a senior Hamas commander is killed by Israeli police in West Bank, IDF says
And there is a lot of sport to ease you into the weekend: it’s day two of the Paralympic Games in Paris; it’s football transfer deadline day; and England are dominating the second men’s test cricket match against Sri Lanka.
Thank you for following the business live blog all of this week. Normal service with the inimitable Graeme Wearden will resume next week! JJ
The buying mood on Wall Street has picked up slightly this morning, perhaps helped by US spending data.
Here are the opening snaps from Reuters on the US’s key stock market indices:
S&P 500 UP 26.43 POINTS, OR 0.47%, AT 5,618.39
NASDAQ UP 136.87 POINTS, OR 0.78%, AT 17,653.30
DOW JONES UP 83.13 POINTS, OR 0.20%, AT 41,418.18
US stock indices futures perked up slightly after the spending data.
Futures trades indicate that the S&P 500 will rise by 0.3% when Wall Street opens in a few minutes.
The US spending data points to a September rate cut by 0.25 percentage points, according to Paul Ashworth, chief North America economist at Capital Economics, a consultancy.
It sounds like something of a Goldilocks reading for the Federal Reserve: not too hot (inflationary) and not too cold (showing a slowdown in consumer spending). Ashworth said:
The July income and spending report shows price pressures remaining muted despite the strength of real consumption.
Even allowing for the unexpected strength of imports, GDP growth is tracking at close to 2.5%, which should ease any lingering recession fears. Overall, this report points to a 25bp rate cut from the Fed next month.
The US spending data does not offer any surprises for economists looking at the Federal Reserve’s plans. It offers a picture of an economy running with fairly strong momentum, and with few signs that inflation is running wild.
As Bloomberg News points out, the headline core personal consumption expenditure (PCE) inflation measure – which strips out volatile food and energy – may be overstating how far off the Fed’s 2% target inflation is. It reported:
On a three-month annualized basis — a metric economists say paints a more accurate picture of the trajectory of inflation — it advanced 1.7%, the slowest this year.
Reuters suggest that the data “argues against a half-percentage-point interest rate cut from the Federal Reserve next month”.
Federal Reserve's preferred core inflation measure steady at 2.6%
The Federal Reserve’s preferred measure of inflation stayed steady at 2.6% year-on-year in July, as the US central bank prepares to cut interest rates.
The core personal consumption expenditure (PCE) price index has risen at the same pace for the past three months after falling. That has helped to persuade the Fed that “the time has come” for interest rate cuts, which are expected to start in September.
US personal spending also rose by 0.5% in July, as expected by economists, in a sign that the American consumer is continuing to hold up the world’s largest economy.
July PCE inflation came in as expected. PCE YoY Core 2.6% vs 2.7%E. Cements Fed rate cut in Sept. Good for equities. pic.twitter.com/sJO6r0M3v4
— Gary Black (@garyblack00) August 30, 2024
HMS Cardiff, the second of the UK’s Type 26 submarine-hunting frigates, is being put onto the water for the first time in Govan, near Glasgow.
The ship is being built by BAE Systems, the FTSE 100 company that dominates the UK’s weapons industry.
BAE said that the ship has been moved from the slipway to a barge. It will be towed down river to a deep-water location in the West of Scotland. BAE Systems said:
Once in position, and over a number of hours, the barge will submerge and the anti-submarine warfare frigate will enter the water. She will then return to BAE Systems’ Scotstoun shipyard where she will undergo the next stages of outfit before test and commissioning.
You can read more about the UK’s shipbuilding – and its struggles – here:
The FTSE 100 has hit a three-month peak, helping European stocks to their record high this morning.
London’s benchmark index hit a high of 8,414.37, overtaking its high point on 1 August, before the financial market turmoil that saw prices rapidly crater before gradually rebounding.
However, it remains short of the record of 8,474.41 on 15 May, as you can see from the below chart covering the last six months.
Government sells more NatWest shares
The Labour government has continued to chip away at the public stake in NatWest, taking the taxpayer holding from 18.99% to 17.97%, according to the latest market update.
It means the stake has more than halved this year, as chancellor Rachel Reeves continues to drip-feed shares to the open market, in a bid to fully exit the holding by 2025-26.
The government stake is a hangover from its £46bn bailout of NatWest, formerly known as Royal Bank of Scotland Group, which resulted in the state taking an 83% stake in the lender in the 2008 financial crisis.
Reeves last month scrapped Tory plans to sell a chunk of state-owned shares to the general public in a highly anticipated privatisation drive, that was due to launch through a “Tell Sid”-style campaign featuring Sir Trevor McDonald. “It would therefore not represent value for money, and it will not go ahead,” Reeves said in July.
The government stake sales have hit two milestones so far this year. In March, the shareholding fell below 30%, meaning the government was no longer classed as a “controlling shareholder”. That meant that during its AGMs, it no longer had to hold two separate votes for resolutions including director appointments (to distinguish between government and independent shareholder votes).
Then, by July, the stake dropped below 20% meaning that by next year, the state will no longer be considered a “related party” – which requires additional transparency around its relationship with the bank.
Commenting on the latest stake sale update, a NatWest Group spokesperson said:
We are pleased with the continued reduction of the government’s stake, which has more than halved this year and now stands at 17.97%.
We welcome the chancellor’s commitment last month to returning NatWest Group to full private ownership. This is a shared ambition that we believe is in the best interests of both the bank and all our shareholders.
Further reading: Growing momentum for a four-day working week
The idea of a four-day working week has moved from the political fringe to mainstream discourse surprisingly rapidly.
The Labour government is now considering compressed hours – 100% of standard working week, but worked over four days instead of five – as an option for flexible working that businesses will have to consider.
In 2018 only a few businesses had opted for the four-day week as a policy. (That is not to say that it is completely new: some shift and part-time work already operated something similar.)
But the policy caught the eye of John McDonnell, Labour’s then shadow chancellor.
The trickle of businesses opting for a four-day week grew slowly at first, but with companies reporting success. The coronavirus pandemic upended working practices for everyone, but particularly for office workers who found they could work remotely much of the time. That added to momentum across Europe.
Joe Ryle, a former Labour staffer, then launched the UK’s 4 Day Week Campaign in 2021. The campaign got more and more businesses on board to trial the change.
Of the 61 organisations that took part in a six-month UK pilot in 2022, 54 (89%) are still operating the policy a year later, and 31 (51%) have made the change permanent.
And the campaign is now looking for businesses to pilot flexible working, including but not limited to the four-day week.
Scottish broadcaster STV poaches ITV executive as new boss
Scottish broadcaster STV has raided rival ITV for its new chief executive with the long-serving executive responsible for the launch of Netflix-challenger ITVX set to start in November.
STV, which earlier this year announced the departure of boss Simon Pitts after six years, has appointed 13-year ITV executive Rufus Radcliffe to run the broadcaster.
Radcliffe, who also previously spent nine years working at Channel 4, has most recently held the role of managing director of ITV’s streaming business and has also served in positions including chief marketing officer.
He was responsible for the launch of ITVX two years ago and during his time at Channel 4 launched the broadcaster’s first streaming service, 4OD.
Radcliffe replaces Pitts, also a former senior ITV executive, who is set to take up the role of chief executive of Global, Europe’s biggest commercially-funded radio operator.
Global, which Pitts will join in November, owns stations including Capital, Heart, LBC and Classic FM and in recent years has acquired outdoor advertising companies including Exterion, which runs the £1.1bn contract for Transport for London including London Underground, the biggest of its kind in the world.
Michael Field, European market strategist at Morningstar, a financial research company, said:
After the spike in inflation we witnessed in July, investors will be glad to see that this number abated in August and fell back to 2.2%. This 0.4% fall now puts us back within touching distance of the European Central Bank’s targeted level.
Core inflation, the measure that strips out volatile components such as fuel and food, also fell by 0.1% to 2.8%. Granted this number remains materially higher than the 2% targeted inflation level; however, it is at least moving in the right direction.
With inflation seemingly settling at or around where we need it to be, and unemployment stable, the ECB should reaffirm this in its course of action. This sets us up nicely for further rate cuts this year.
The eurozone inflation fall means “September’s rate cut is a go” for the European Central Bank (ECB), according to Melanie Debono, senior Europe economist at Pantheon Macroeconomics, a consultancy.
For the ECB these data are broadly in line with the June expectations for the third quarter on the headline, but core inflation is looking somewhat stronger than the central bank expected. Still we think a rate cut by the ECB in two weeks’ time is a decent bet.
Eurozone inflation is now just a touch above target, making it difficult for the bank to justify its current extremely restrictive monetary stance. Interest rates were raised to their current level when inflation was over 5% last year and wage growth figures are rolling over.
The below chart shows eurozone inflation over the past five years. You can see the period of deflation in the first months of the coronavirus pandemic. That was followed by the surge in inflation as pandemic disruption played havoc with supply chains, and then Russia’s full-scale invasion of Ukraine pushed up energy prices dramatically.
However, price growth has slowed steadily, and in August it hit 2.2%, marginally above the ECB’s 2% target and the lowest since June 2021.
Eurozone inflation falls ahead of European Central Bank September meeting
Eurozone inflation fell as expected to 2.2% in August, down from 2.6% in July, in data that will strengthen the case for the European Central Bank to cut interest rates at its next meeting on 12 September.
Falling energy prices had the biggest effect on dragging the harmonised index of consumer prices down, according to Eurostat, the EU’s data agency. It said:
Services is expected to have the highest annual rate in August (4.2%, compared with 4.0% in July), followed by food, alcohol & tobacco (2.4%, compared with 2.3% in July), non-energy industrial goods (0.4%, compared with 0.7% in July) and energy (-3.0%, compared with 1.2% in July).
However, eurozone unemployment also edged down unexpectedly from 6.5% to 6.4%. Central bankers tend to be wary of cutting interest rates when unemployment is falling because it can be a sign of shortages of workers that could lead to inflationary pressures building.
Sam Miley, managing economist and forecasting lead at the Centre for Business and Economics Research, a consultancy, said:
Eurozone inflation slowed to 2.2% in August from 2.6% in July, driven by energy price declines. This marked the slowest rate of price growth for more than three years and makes a rate cut at the European Central Bank’s upcoming September policy meeting more likely.
However, the higher rate of core inflation and continually tight labour market will present risk factors to implementing looser monetary policy.
Most UK mortgages approved since Liz Truss's 'mini-budget' chaos
British lenders approved the most mortgages for house purchases since September 2022, when the market was roiled by the financial chaos unleashed by Liz Truss and Kwasi Kwarteng’s “mini-budget”.
Net mortgage approvals for house purchases increased to 62,000 in July, the highest since September 2022 (65,100), and up from 60,600 in June, the Bank of England reported.
The figures highlight the effect of falling interest rates are expected to have on the UK mortgage market. The Bank of England cut interest rates at the start of this month for the first time since March 2020.
Consumer credit borrowing also rose to £1.2bn in July, from £0.9bn in June.
Rob Wood, chief UK economist at Pantheon Macroeconomics, a consultancy, said:
Overall we take a broadly positive message about the economic outlook. Consumers remain reticent about borrowing on credit cards […] But new mortgage approvals for house purchase jumped to 62.0K in July, the highest in nearly two years, which suggests consumer spending caution will fade as interest rates decline.
We expect mortgage approvals to gain further ground, rising to 65.0K in the next few months as mortgage interest rates decline in response to Bank of England interest rate cuts. Lower borrowing costs along with households already saving enough to build real liquid assets suggest consumers can raise spending in line with income for the rest of this year, powering GDP growth.
Labour minister says flexible working will be good for productivity
Education minister Jacqui Smith has said that flexible working – including the option to work compressed hours over four days – could be good for productivity for UK businesses.
Lady Smith confirmed that compressed hours – working 100% of standard hours, but over four longer days – is one flexible working option that employers could consider.
However, Smith and the Department for Business and Trade both denied that employers would be forced to impose four-day weeks.
It followed a Daily Telegraph report that workers would get “new rights to demand a four-day week”.
Smith, a former Labour home secretary now in the House of Lords, is serving as an education minister under Keir Starmer. She told LBC radio:
We think that flexible working is actually good for productivity. The four-day week that I know is on the front of quite a lot of newspapers today, what we’re actually talking about there is the type of flexible working that enables you to use compressed hours.
So perhaps instead of working eight hours a day for five days, you work 10 hours a day for four days.
You’re still doing the same amount of work, but perhaps you’re doing it in a way that enables you, for example, to need less childcare, to spend more time with your family, to do other things, that encourages more people into the workplace.
Is four-day working a utopian dream? The argument of the 4 Day Week Campaign is that it is the next step on from the start of the trade union movement, when the standard work week gradually changed from a six-day week to five.
A key argument by proponents is that productivity has improved significantly over the past century, so we should use some of those gains to improve our lives by working less. Another aspect is that some companies have claimed that productivity has increased because workers are more engaged – although ongoing pilots will give more evidence of whether this is true, and whether it will be durable.
Opponents of the four-day week, including the Conservative party in the UK, argue that it will reduce economic output. The Daily Telegraph story today cited unnamed critics who believe flexible working (which could include compressed hours, hybrid working, and flexible start and end times) could reduce productivity.
Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, a financial newsletter, said:
Gone are the days of a four-day work week being merely a whisper in the corridors of progressive workplaces; it is now a potential legislative reality. Yet, despite the natural ‘too good to be true’ suspicion surrounding anything that feels remotely utopian, this policy could be a beacon of hope for improved mental health and enhanced productivity. Furthermore, it is hard to discount the overwhelmingly positive results from the recent policy trial in 2022.
Of course, implementing a four-day week is not without its legal complexities, as while employees may be dancing in the streets, employers could find themselves caught in a tango of logistical nightmares, increased operational costs and reduced output. Yet by daring to dream of a radical new approach to work, it has the potential to turn the vision of a balanced life and a thriving economy into a tangible reality.
Compressed hours could be one of the flexible working options that employers will reportedly have to consider under Labour government plans.
That would be a step towards the goals of four-day week campaigners, if not a final destination. The 4 Day Week Campaign is pushing for an actual cut in the number of hours worked to 80% of the standard, rather than compressed hours which mean you work 100% of the hours, but over four days.
Joe Ryle, director of the 4 Day Week Campaign, said:
This is a welcome move from the government which recognises that the future of work we are heading for is a four-day week for all.
However, these proposals would only allow workers to compress their working hours rather than reduce them which we have found is key for improving work-life balance and also maintaining productivity.
Compressing the same amount of hours into four-days rather than five can be an important first step on the road to a true four-day week but reducing overall working hours is crucial.
Shell to cut fifth of workers in oil and gas exploration
Shell is reportedly planning to cut a fifth of its workers in two parts of its oil and gas exploration and development division, as part of further efforts to drive down costs across the business.
The cuts will affect hundreds of jobs, sources told Reuters. It reported:
The restructuring in the exploration and wells development and subsurface units will see hundreds of job cuts around the world, and will be felt in particular in its offices in Houston, The Hague and to a lesser degree in Britain.
Shell reported 103,000 employees overall in 2023, but that number is likely to have dropped after Wael Sawan took over that year with a plan to cut spending at the profitable company dramatically.
Sawan has already slashed jobs numbers at its relatively tiny low-carbon division, in an effort to focus on profitability rather than the transition away from fossil fuels.
The International Energy Agency has said that the world should not explore for any more new oil, gas or coal resources if it is to reach net zero emissions by 2050. But that is not the reason for Shell’s plans to cut exploration costs; rather, it is in search of higher profits.
Euro Stoxx 600 hits new record, recovering from early August turmoil
The small movement from Europe’s Stoxx 600 has nevertheless pushed it to a new record high.
The index, which includes all of the big companies in the UK, France, Germany and Italy, among others, was up 0.2% to hit 525.63 points, breaching its previous intraday record of 525.59 points from 7 June.
It also marks the complete recovery from the turmoil on financial markets in early August, when trading suddenly turned chaotic on US recession fears – fears that so far appear to have been misplaced.
You can see the August drop in the top-right-hand side of this two-year chart:
It’s a mixed start for Europe’s stock market indices on the last trading day of August.
Here are the opening snaps via Reuters:
EUROPE’S STOXX 600 FLAT
BRITAIN’S FTSE 100 UP 0.3%; GERMANY’S DAX DOWN 0.1%
FRANCE’S CAC 40 FLAT; SPAIN’S IBEX UP 0.3%
EURO STOXX INDEX FLAT; EURO ZONE BLUE CHIPS DOWN 0.2%
Annual UK house price growth at 20-month high; Compressed hours 'among UK flexible working options'
Good morning, and welcome to our live coverage of business, economics and financial markets.
UK house prices rose at the fastest annual rate in 20 months in August – although they remain short of the record highs hit in the summer of 2022, according to the latest figures from Nationwide.
Annual growth rate picked up to 2.4%, from 2.1% in July, the UK’s largest building society said. However, on a monthly basis its figures showed a 0.2% dip in prices, which it said was a result of “seasonal factors”.
That meant the average price of a UK home was £265,375.
Robert Gardner, Nationwide’s chief economist, said that lower interest rates to come from the Bank of England would likely push house prices higher. He said:
While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings (which makes raising a deposit more challenging).
Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.
Labour reportedly to ‘give default right to ask for compressed hours’
The Labour government is considering giving UK workers the right to ask for compressed hours among other flexible working options – a type of four-day working – according to the Daily Telegraph.
The four-day week campaign is a push to reduce the number of days people work in a standard week from five to four. However, the somewhat different compressed hours – working the hours of five days in the space of four days – may be an option employers would have to consider, the paper reported.
The Telegraph cited an unnamed Labour source who said:
The Conservatives pledged to make flexible working the default then failed to do so. We’ll build on their existing legislation to ensure flexibility is a genuine default, except where it is not reasonably feasible for employers to agree.
Flexible working options such as compressed hours and term-time working can support more people to stay in the workforce and boost productivity, whether keeping parents in their jobs or helping those juggling caring responsibilities for older relatives.
There is an important health warning in the story: “Exactly how the new approach will work in practice is legally unclear.”
A government even considering giving compressed hours would be a significant change from the Conservatives, who were vehemently opposed to the four-day week. However, the Conservative government did introduce a right for workers to request – not demand – flexible working from day one.
Flexible working can include hybrid working, mixing working from home and the workplace for some roles, part-time, and flexitime, when employees choose their start and end times.
The UK 4 Day Week Campaign is running a pilot programme looking at flexible working options.
The agenda
9:30am BST: UK Bank of England consumer credit (July; previous: £1.16bn; consensus: £1.3bn)
9:30am BST: UK Bank of England mortgage approvals (July; prev.: 59,980; cons.: 60,500)
10am BST: Eurozone inflation rate (August; prev.: 2.6%; cons.: 2.2%)
10am BST: Eurozone unemployment (July; prev.: 6.5%; cons.: 6.5%)
1pm BST: India GDP growth rate (second quarter; prev.: 7.8% year-on-year; cons.: 6.9%)
1:30pm BST: US core personal consumption expenditure price index (July; prev.: 0.2%; cons.: 0.2%)
