Closing summary
Time for a final recap.
A worrying rise in companies collapsing last month shows that many UK firms are in a “perilous” position as 2024 draws to an end.
New data from the Insolvency Service this morning shows there was a 13% increase in registered company insolvencies in England and Wales in November, to 1,966.
That may intensify concerns that the economy is weakening, following data yesterday showing firms are cutting staff this month.
UK pay growth accelerated to 5.2% in October, putting pressure on the Bank of England to resist calls for lower interest rates when policymakers meet later this week.
The Office for National Statistics (ONS) said annual growth in employees’ average earnings – which had been slowing for more than a year – jumped after a significant rise in wages paid for skilled workers in the manufacturing sector.
Wages rose 4.4% including bonuses and 4.9% excluding bonuses in the three months to September, but both hit 5.2% in the three months to October.
The rise in pay for factory workers to 6% meant the split between civil servants and private sector employees widened. Annual average regular earnings growth was 5.4% for the private sector and 4.3% for the public sector, the ONS said.
Our other main stories today:
Thank you for reading. We’ll be back tomorrow. Take care! – JK
In Canada, inflation dipped below the central bank’s 2% target in November, driven by Black Friday discounts, which should reverse this month.
Headline inflation, as measured by the annual change in the consumer prices index, dropped to 1.9% from 2% in October, official figures showed.
Thomas Ryan, North America economist at Capital Cconomics, said:
The Bank will probably choose to look through the decline in headline inflation, given it was supported by temporary factors.
It cannot do the same, however, for the second consecutive strong 0.3% month-on-month gains in the CPI-trim and CPI-median measures, given they excluded the large price falls in the consumer goods-related components (and the jump in travel services). The 3-month annualised rate for the average of the two is now at 3.3%, above the upper limit of the Bank’s 1% to 3% target range.
We do not think this is enough for the Bank to call time on its easing cycle but, paired with the recent pick-up in some of the activity data, it confirms that the Bank will start moving in smaller 25bp increments and raises the chance of a pause at the meeting next month.
Industrial output in the United States fell slightly last month, confounding economists who had expected a rise, while the manufacturing sector posted a small increase.
Industrial output slipped by 0.1% in November from October, following October’s 0.4% drop. Analysts had expected a rise of 0.3%. Mining and utilities production both declined, by 0.9% and 1.3% respectively.
Manufacturers fared better, recording 0.2% growth in output although this was also worse than expected, and came after a downwardly revised fall of 0.7% in October.
U.S. industrial production fell 0.1% in Nov (after -0.4% in Oct). Manufacturing rose 0.2%, led by motor vehicles (+3.5%), while mining (-0.9%) & utilities (-1.3%) declined. Capacity utilization dropped to 76.8%, below the 1972–2023 avg. Mixed results across sectors. pic.twitter.com/FRjfGMQBze
— Econoday, Inc. (@Econoday) December 17, 2024
2024 'the year of the bond'
Investors have poured more than $600bn into global bond funds this year, a record sum, taking advantage of some of the highest yields in decades, ahead of an uncertain 2025.
Slowing inflation has allowed central banks to lower interest rates, pushing investors to lock in the high yields available in the “year of the bond”. As of mid-December, $617bn had flowed into developed and emerging market bond funds, according to Reuters, citing financial data provider EPFR, putting 2024 on track to be a record year.
Bond yields tend to fall, and prices rise, when central banks reduce short-term borrowing costs.
Vasiliki Pachatouridi, head of EMEA iShares fixed income strategy at BlackRock, told Reuters:
The story is income. We are seeing the income being put back into fixed income. We haven’t seen these levels of yields in almost 20 years.
Another $670bn has been invested in stock markets, as indices in the US and Europe scale new heights. Cash equivalent money market funds, which boast high yields and little risk, have fared the best, pulling in more than $1 trillion.
Corporate bonds, which offer higher yields than equivalent government debt, have proven particularly popular. The yield on the ICE BofA global corporate bond index has fallen to its lowest over risk-free government debt since before the financial crisis in 2007.
UK proposes letting tech firms use copyrighted work to train AI
Campaigners for the protection of the rights of creatives have criticised a UK government proposal to let artificial intelligence companies train their algorithms on their works under a new copyright exemption.
Book publishers said the proposal put out for consultation on Tuesday was “entirely untested and unevidenced” while Beeban Kidron, a crossbench peer campaigning to protect artists’ and creatives’ rights, said she was “very disappointed”.
Under the proposals, tech companies will be allowed to freely use copyrighted material to train artificial intelligence models unless creative professionals and companies opt out of the process.
The changes are seeking to resolve a standoff between AI firms and creatives. Sir Paul McCartney has warned the technology “could just take over” without new laws while the government has warned “legal uncertainty is undermining investment in and adoption of AI technology.”
Despite growing use of card payments, there is always going to be a role for cash, MPs heard from the Post Office, the Association of Convenience Stores, the union representing shop workers and others.
The Commons Treasury committee held a hearing on the acceptance of cash this morning. Several witnesses talked about how important cash still is to many people, including the elderly and those on low incomes because they find it easier to stay within their budget.
Carrie Aspin, senior researcher at the Union of Shop, Distributive and Allied Workers, told MPs:
We represent 365,000 members, and a large portion of them are low paid workers. We know that for a lot of our members, cash is really important in terms of budgeting and managing their finances. So we do see a future for cash.
We think it’s not just a choice that consumers are making, and we think it’s absolutely necessary for low paid workers and for more vulnerable groups across society, and we’re seriously concerned that the decline in cash acceptance is going to lead to people being left behind.
Others said cash is important to have as a back-up in case of outages.
James Lowman, chief executive of the Association of Convenience Stores, told the committee:
I think some customers will always prefer to use cash. There are some consumers who are unbanked.
Retailers of all kinds will be reluctant to be entirely reliant on card payments. When you think back earlier this year, the CrowdStrike issue, for example, where, due to some problems with the online antivirus security system, a number of card payment systems went down for certain retailers. It’s luck of the draw, really, about how you were affected.
The CrowdStrike outage in July caused havoc across a swathe of industries spanning the global economy.
Airlines, railways, hospitals, television stations, sports clubs and financial systems were among the sectors hit by the technology glitches, prompting national governments to convene emergency meetings and stock markets to fall.
Ross Borkett, banking director of Post Office Limited, said:
Our postmasters across the country are providing an increasing amount of cash services. Last month alone, we served over £3.5bn in cash transactions. It’s a staggering amount of of money that we are supporting communities with, and we are seeing that grow month on month. And so we absolutely see it as a really important part of support to communities, but we don’t see it going away. We will see it decline slowly over time, but remain a very, very important payment method for many people.
Updated
After more than 1,000 days, the inquiry into the Post Office Horizon IT scandal has been wrapping up today.
And Paula Vennells’ legal team has told the inquiry to treat the evidence of some witnesses “cautiously”, as a desire for “self-preservation” means that they were trying to scapegoat the former Post Office chief executive for the scandal.
Samantha Leek KC, delivering the closing statement on behalf of Vennells to the public inquiry on Tuesday, said that as Vennells has become a high-profile figure in the scandal others have tried to “point the finger at her”.
She told the inquiry:
“When witnesses have given recent evidence of matters relevant to Ms Vennells without it being supported by contemporaneous documents, this evidence should be approached cautiously.
“It is inevitable, having regard to the very human desire for self-preservation, that witnesses will now seek to distance themselves from Ms Vennells.”
Barclays will seek to appeal after losing its bid to overturn a key ruling on motor finance commission (see earlier post).
A Barclays spokesperson says:
“This challenge related to a single, specific case on which we disagreed with the Financial Ombudsman Service’s decision.
We are disappointed in the court’s ruling and will be appealing.”
The case is likely to affect a potential multibillion pound redress scheme from Britain’s finance watchdog, related to the commissions which customers paid when consumers bought a car on credit.
Stephen Haddrill, director general of the Finance & Leasing Association, has said:
“We note the High Court’s decision, which relates to a single case and which Barclays is planning to appeal. With the Supreme Court due to discuss similar issues in spring 2025, we look forward to that process.”
Updated
Despite signs of economic weakness, it would be a big shock for the City if the Bank of England votes to cut interest rates this week, at its final meeting of the year.
Shaan Raithatha, senior economist at Vanguard, says the Bank has signalled strongly that it will ease policy “gradually”, explaining:
Expect no change to policy on Thursday. Eyes will be focused on how the MPC are interpreting the effect of the employer NIC hike on growth and inflation. Early data suggest employment expectations have slowed sharply.
This skews the risks to a more dovish outlook, relative to our forecast of Bank Rate ending 2025 at 3.75%, one percentage point lower than today.”
Andrew Wishart, economist at Berenberg says “A cut is a luxury the BoE cannot afford”, adding:
“Persistent price pressures will prevent the Bank of England (BoE) from responding to flat output and falling employment by cutting interest rates this Thursday.
Swati Dhingra, the most dovish member of the Monetary Policy Committee (MPC), may advocate a cut by arguing that diminishing competition for workers will lower pay growth and inflation over time. But recent increases in pay growth and leading indicators of inflation alongside concerns that the increase in taxes on employment announced in the 30 October budget will be inflationary should convince the majority of the MPC to stick to a gradual (i.e. once per quarter) pace of rate cuts. We expect an 8-1 vote to keep bank rate unchanged at 4.75% on 19 December ahead of a third 25bp cut on 6 February.
Luton Stellantis factory workers protest closure plans
In Luton, Stellantis workers have begun a two-day protest and a rally over the company’s plans to shut its electric van factory.
The Unite union is calling for Stellantis to halt its plans to shut the Luton factory, which were announced just days before the shock departure of CEO Carlos Tavares.
Unite want “proper negotiations” between workers, management and government over the future of the plant.
Unite general secretary Sharon Graham said yesterday:
“Shutting the profitable Luton factory when it has just been made ready to produce electric vehicles from 2025 makes no sense. Time has now rightly been called on Carlos Tavares, whose counterproductive strategy of cutting Stellantis to the bone to artificially inflate profits has clearly failed.
“The opportunity is now there for Stellantis to prevent the needless destruction of its Luton operations.
The £3.3bn takeover of the UK soft drinks maker Britvic by the Danish brewer Carlsberg has received the go-ahead from Britain’s competition watchdog, raising fears of job losses.
The Competition and Markets Authority said it had cleared the proposed deal, a day before the deadline for the first phase of its investigation into the takeover.
The watchdog began studying the deal in late October and said it would publish a full statement with the reasons for its decision to approve the deal later on Tuesday.
Britvic, which makes well-known drinks such as Robinsons squash, J20 and R White’s lemonade, accepted a £13.15-a-share offer from Carlsberg in July.
The company will be called Carlsberg Britvic, and combine Britvic’s soft drinks portfolio with Carlsberg’s beer offering, which includes Kronenbourg 1664 and Brooklyn, creating a beverage “powerhouse” in the UK and elsewhere in Europe, according to the Danish company. The deal is expected to be completed in January.
Campaigners urge high court to block £3bn Thames Water bailout
Campaigners have gathered outside the high court in London calling for judges to block a financial bailout of struggling Thames Water.
MPs, activists and members of the public were protesting on Tuesday outside the court where the privatised water company was seeking a £3bn financial lifeline (as explained in earlier post).
The company is trying to secure approval from the high court for the money – referred to as a “liquidity extension” – which some creditors have already agreed to lend. Without this extension, the company, which has debts of £15bn, says it will run out of cash by next March.
Analysis by the campaign group We Own It, who were protesting outside the courts, estimates that the bailout, if approved, will cost customers £250 a year each.
Updated
Budget blamed for rising insolvencies
Fallout from October’s Budget and ongoing cost issues are driving up corporate insolvencies, reports Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body.
Cooper says:
After years of rising outgoings and falling margins, businesses are facing further increases in wages as a result of the Chancellor’s announcement and this could be an expense too far for some firms.
“Members are telling us that enquiries have increased over the last month, as firms look to restructure or have early conversations about their financial concerns or their insolvency options ahead of the new year.
This kind of activity won’t be reflected in the current set of insolvency statistics, but it provides an insight into the mood, challenges and concerns of the business community as we come to the end of another difficult year.
Updated
Here’s Benjamin Wiles, UK Head of Restructuring at Kroll, on today’s insolvency statistics:
“In terms of company administrations, while our data shows we expect to see a small increase compared to last year, what today’s figures don’t reflect is a bigger pick up in restructuring activity. There of course are many companies experiencing distress, where an insolvency is the only way to save the business. However, I’d say the majority of companies we have advised have come away with a solvent solution. Whether that’s refinancing, restructuring debt or capital injections.
“Following the Budget, there is understandable interest in sectors like hospitality, leisure and care homes. The new measures won’t take effect until the Spring, so it’s unlikely we will see an immediate uptick in insolvencies post-Christmas, however, these businesses are beginning to plan now in anticipation.”
There was also an increase in personal insolvencies last month, highlighting the financial pressure on households.
The Insolvency Service reports that 10,012 individuals entered insolvency in England and Wales in November 2024. This was 12% higher than in October 2024 and 25% higher than in November 2023.
Here’s a chart showing how company insolvencies in England and Wales rose last month, but were lower than a year ago:
Barclays car finance appeal fails
Barclays has lost a key court appeal which could have ramifications for the wider car finance sector.
It comes after the supreme court granted permission for two car lenders to appeal against a separate landmark ruling on motor finance commission payments that left firms fearing a potential £30bn compensation bill last week.
Tuesday’s decision to uphold a ruling that Barclays did not treat a customer fairly when she was sold a used-car could inform future decisions on complaints about car loans, lawyers have claimed.
Company insolvencies rise across England and Wales
A worrying rise in companies collapsing last month shows that many UK firms are in a “perilous” position as 2024 draws to an end.
New data from the Insolvency Service this morning shows there was a 13% increase in registered company insolvencies in England and Wales in November, to 1,966.
That may intensify concerns that the economy is weakening, following data yesterday showing firms are cutting staff this month.
On an annual basis, though, that’s 12% lower than in November 2023 when 2,243 firms went under.
The Insolvency Service reports that there were 254 compulsory liquidations last month, plus 1,565 creditors’ voluntary liquidations (CVLs), 132 administrations, 14 company voluntary arrangements (CVAs) and one receivership appointment.
David Hudson, restructuring advisory partner at business advisory firm FRP, says:
“Despite a year-on-year fall, a shorter-term ramping up of insolvencies amid the festive season is a stark reminder of the perilous financial position many firms find themselves in.
“Insolvency levels have remained high throughout the course of the year and, despite improving economic conditions – including lower levels of inflation and rate cuts – we anticipate them remaining so in 2025 as firms continue to carry unsustainable levels of debt.
“Increased National Insurance contributions will add to firms’ costs next year, and businesses in consumer-led sectors like retail, leisure and hospitality are likely to be at risk should Christmas trading prove underwhelming.
“The volume of administration processes – which are more likely to involve large employers than general company winding ups, and have been in flux in recent months – will be an important barometer of business health over the next 12 months.”
Updated
The economic picture in Germany remains grim this morning.
German business expectations sank in December, according to new data from the Ifo institute.
Ifo’s measure of economic expectations in Germany has fallen to 84.4 from 87, worse than expected.
Ifo president Clemens Fuest told Bloomberg TV that the next German government must prioritise economic growth, warning:
“This weakness in the German economy is becoming chronic.”
The data shows that German businesses have become more worried about the country’s growth outlook, explains Carsten Brzeski of ING, who told clients:
The only good thing about Germany’s just-released Ifo index is that it is the final major macro indicator released this year.
Time to take a breather and to end a year that will go down as the second consecutive year of economic stagnation. Even worse, on average, the German economy has been in stagnation since 2020 and is currently hardly any larger than at the start of the pandemic.
A rescue deal for Harland & Wolff, the Belfast-based shipbuilder that produced the Titanic, could come this week – three months after it collapsed into administration.
Sky News’s Mark Kleinman is reporting that Spanish state-owned shipbuilder Navantia could announce an agreement last this week, saving over 1,000 jobs.
Exclusive: The stricken Titanic shipbuilder Harland & Wolff is close to being rescued by Spain’s Navantia in a deal worth a headline price of about £70m; a deal could be announced as soon as Thursday, and will include a guarantee to preserve more than 1000 UK jobs. More soon.
— Mark Kleinman (@MarkKleinmanSky) December 17, 2024
Navantia and Harland & Wolff were recently awarded a £1.6bn contract to build three Navy support ships at H&W’s Belfast yard for the UK government.
This morning’s UK jobs report shows a 173,000 increase in people in work, in the August-October quarter, to 33.77 million, putting the employment rate at 74.9%.
But unemployment rose too, by 31,000, to 1.508m people.
The number of 16 to 64 year olds economically inactive dipped by 67,000, to 9.337m.
Stephen Evans, chief executive of Learning and Work Institute, say:
On most measures the labour market looks flat, with employment little changed and vacancies down. Employment growth seems to have driven most by rises in health and social care, with the latest HMRC data showing falls in sectors like hospitality. This suggests an underlying weakness in the economy.
Progress toward the Government’s 80% employment rate target depends on getting the economy going and providing more help for people outside the labour market to find jobs.
The Resolution Foundation have analysed today’s UK labour force data, and concluded that the jobs market continues to cool amidst a wider economic slowdown.
Hannah Slaughter, senior economist at the Resolution Foundation, says:
The number of people in work is starting to fall, and business confidence is weak.
“But there are also signs of resilience. Firms are still hiring at a respectable rate and pay packets are still growing. The big living standards question for 2025 will be whether hiring and wage growth can continue to boost household incomes, or if they’ll tail off with the rest of the economy.”
This morning’s report from the ONS shows that the number of people on UK payrolls fell by 35,000 to 30.4 million between October and November.
FTSE 100 hits three-week low as Bunzl suffers deflation
Stocks are in retreat in London this morning, pulling the FTSE 100 share index down to its lowest level since 22 November.
The FTSE 100 is down 57 points, or 0.7%, at 8,205 points.
Bunzl, the distribution and outsourcing company, are the top faller, down 4.6% after warning that its operating profits will be hit by stickier than anticipated deflation, particularly in continental Europe.
Other European markets are also in the red, with Italy’s FTSE Mib down 0.5% and small losses in Paris and Frankfurt.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
“The FTSE 100 has opened down 0.7% this morning, following a broader trend lower across European markets. Investors are digesting key UK wage data and bracing for interest rate decisions from major central banks, including the Bank of England and the US Federal Reserve.
Rates are expected to hold firm in the UK later in the week, while the US looks all but certain to cut on Wednesday.
Updated
Billionaire Guy Hands’s property firm sells military homes to MoD for £6bn
A property company linked to Guy Hands has agreed to sell 36,000 military homes to the UK’s Ministry of Defence for almost £6bn, signalling an end to a long-running battle between the billionaire and the government.
Annington will hand over its 999-year lease on the Married Quarters Estate to the MoD and receive £5.99bn in return – almost twice as much as Hands’s company Terra Firma paid for Annington more than a decade ago, but less than the £8bn the homes were valued at last year.
The sale ends court proceedings brought by Annington over planned housing reforms.
In September, the company took a legal fight with the UK government to the European court of human rights over fears it could lose significant sums as a result of the new Leasehold and Freehold Reform Act. It also launched a challenge in the high court on the same grounds.
Thames Water seeking court approval for emergency bailout today
Today is a crunch day for struggling UK utility Thames Water.
Thames is heading to the High Court this morning to seek appoval for a £3bn emergency loan designed to keep the company afloat.
If Thames can’t get the emergency funding from its creditors, it risks running out of cash by next March, putting it at greater risk of temporary nationalisation.
Last month, Thames won support from 75% of the holders of its least risky loans – known as class A debt – for the cash lifeline, the minimum threshold needed to receive court approval for changes to its debts.
Securing the emergency cash would give Britain’s biggest water company time to try to raise the billions of pounds of new equity investment it needs to return to a more stable footing.
The court hearing, which starts at 10.30am before Mr Justice Trower, comes at the start of a crucial 48-hours for Thames and the industry.
On Thursday, regulator Ofwat will publish its “final determination” on water company five-year business plans, setting out how much they will be permitted to increase consumer bills and what return they can offer investors.
Updated
ING have calculated that UK private sector wage growth increased by 12% on a one-month annualised basis in October.
This will matter for the Bank of England, they say, because private sector pay trends tend to be more reflective of the wider situation in the jobs market than in the public sector.
James Smith, developed markets economist at ING, told clients:
Admittedl, these numbers can be volatile and it’s hard to pin an obvious reason on the latest surge. But it will heighten suspicion among BoE hawks that wage growth is not going to readily come back down to pre-Covid levels.
Today’s “red hot private sector wage figures” almost guarantee that the Bank of England will stress a slow and steady approach to rate cuts on Thursday, predicts Matthew Ryan, head of market strategy at global financial technology firm Ebury.
He adds:
While UK inflation now appears largely under control, still sky-high earnings growth, combined with the pro-inflationary impact of the Autumn Budget and Trump’s trade policies, risks keeping consumer prices higher for longer.
“There is now effectively zero chance that the MPC lowers rates again this week, with today’s news raising the possibility of a unanimous vote among the committee in favour of no change. The communications will place a heavy emphasis on the need for a ‘gradual’ approach to easing in 2025, which would likely raise doubts over the prospect of another rate reduction in February. Indeed, markets are now barely pricing in two 25 basis points cuts throughout the entirety of next year.
UK government bonds hit by rising wages
The prices of UK government bonds are falling in early trading, lifting the yield – or interest rate – on the debt.
Investors are calculating faster-than-expected wage growth means inflation, and interest rates, could be higher than previously forecast, meaning they expect a higher rate of return for holding UK debt.
The yield on two-year UK bonds – used to price fixed-term mortgages – has risen by 8 basis points to 4.35%, up from 4.27% last night.
Benchmark 10-year UK gilt yields are up 7 basis points, to 4.5%, while long-dated 30-year bond yields have risen by 5bps, to over 5%.
Liz Kendall: we need to get Britain working again
On today’s labour force statistics, Work and Pensions Secretary, Liz Kendall MP says:
“Today’s figures are a stark reminder of the work that needs to be done.
To get Britain growing again, we need to get Britain working again – so people have good jobs which pay decent wages and offer the chance to progress.
Through our Get Britain Working Plan we will do just that – transforming Jobcentres, making sure every young person is earning or learning and properly joining up work, health and skills support to drive up employment and drive down poverty in every corner of our country.
And from April, someone working full time on the minimum wage will be £1,400 better off, meaning more money in people’s pockets, delivering on the plan for change to improve living standards and make people better off.”
The pound has nudged up to $1.27 against the US dollar, up 0.15%, to its highest since last Friday, after this morning’s UK jobs report.
Another sign that interest rates cuts are seen as less likely….
Today’s pay growth figures will make the Bank of England’s monetary policy committee “nervous”, says Thomas Pugh, economist at audit, tax and consulting firm RSM UK.
Pugh explains:
“The jump in wage growth excluding bonuses to 5.2% puts another nail in the coffin of an interest rate cut on Thursday. What’s more, there was little sign that firms have reduced hiring ahead of the budget. Our base case is that the MPC will cut rates once a quarter next year, but strong wage growth and a second Trump presidency increases the risk of fewer rate cuts.
Pugh adds there is little evidence that pre-budget worries caused firms to radically alter their employment plans.
Employment rose by 173,000 in the three months to October and the unemployment rate remained at 4.3%. Admittedly, the employment statistics are unreliable at the minute so the jump may have been driven by revisions to the data rather than a genuine increase. It may also be that most of the impact on the labour market will come after the budget.
Indeed, the number of employees on payrolls dropped by 35,000 in November, but this metric is extremely volatile, and we don’t put much faith in one month’s numbers so this is one to watch.
Bank of England interest rate cuts now less likely
City traders are scrambling to readjust their expectations for UK interest rate cuts, following this morning’s acceleration in UK wage growth.
The money markets now indicate there’s just a 7% chance that the Bank of England cuts interest rates on Thursday, down from around 15% yesterday.
The markets no longer expect three cuts next year either. Bank rate, which is currently 4.75%, is now seen falling to around 4.1% in December 2025, meaning only two quarter-point rate cuts are fully priced in.
Yesterday it was expected to fall nearer to 4%, which had implied three quarter-point rate cuts next year.
UK RATE FUTURES POINT TO ABOUT 61 BASIS POINTS OF BANK OF ENGLAND RATE CUTS BY END OF 2025 VS 69 BPS BEFORE UK LABOUR MARKET DATA
— First Squawk (@FirstSquawk) December 17, 2024
Ashley Webb, UK economist at Capital Economics, says today’s wage data will do little to shift the Bank’s focus away from worrying about high inflation, explaining:
The increase in regular private sector pay growth in October will increase the Bank of England’s concerns about a resurgence in inflation despite the weak news on activity.
Real earnings accelerate too
UK pay growth has also jumped once you adjust for inflation.
Using CPI real earnings, real regular and total pay rose by 3.0% on the year in August to October, the Office for National Statistics reports.
That’s the fastest growth in real pay since this spring, the ONS explains:
Regular real annual growth was last higher than 3.0% in April to June 2024 (3.2%) and for total real pay was equal to 3.0% in March to May 2024. Total annual growth is no longer affected by the civil service one-off payments made last year.
Introduction: UK pay growth picks up
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Pay growth across the UK has picked up, ending the recent slowdown in earnings, even though fewer vacancies are available for workers across the economy.
New data from the Office for National Statistics this morning show that average pay, both including and excluding bonuses, rose by 5.2% per year in the three months to October.
That’s up from 4.9% for regular earnings in July-September, and 4.4% for total earnings [updated], suggesting an acceleration in pay growth this autumn.
Average weekly earnings were up 5.2% on the year both including and excluding bonuses in August to October 2024.
— Office for National Statistics (ONS) (@ONS) December 17, 2024
This is an increase from annual rates of 4.4% and 4.9% respectively in the previous three-month period.
Read more➡️ https://t.co/z0cMVTJVS6 https://t.co/l516eFVEcy pic.twitter.com/1ooCttA7t2
Manufacturing workers saw the largest pay rises, again, with average pay up by 6.0%.
Regular earnings (ex-bonuses) swelled by 5.4% in the private sector, and by 4.3% in the public sector, the ONS reports.
While rising pay will cheer workers, especially as Christmas bills pile up, it will cause some jitters at the Bank of England – where policymakers fret about inflationary pressures building.
ONS director of economic statistics Liz McKeown said:
“After slowing steadily for over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay. Pay growth including bonuses increased by more, but this reflects previous figures being affected by the one-off payments made to some public sector employees in 2023.
“The number of people on payrolls grew slightly in October, but we have seen annual growth rates continue to slow, showing a consistent trend with our latest jobs data from employers. The number of job vacancies has also fallen again, though the total remains a little above where it was before the pandemic.
More broadly, the latest labour force statistics also show another decrease in vacancies; they fell by 31,000 in the September-November quarter to 818,000 – still above their levels before the Covid-19 pandemic.
There were 818,000 job vacancies in September to November 2024, down 33,000 on the previous three months, although still 22,000 above pre #COVID19 levels.
— Office for National Statistics (ONS) (@ONS) December 17, 2024
Read more ➡️ https://t.co/vkV6oK8N6c pic.twitter.com/NcHr8Z3CBL
The ONS has reweighted the Labour Force Survey with updated population data, in an attempt to make its statistics more reliable.
Today’s report shows that the unemployment rates was 4.3% in the three months to October, the same as a month ago.
Joe Nellis, economic adviser to accountancy and advisory firm MHA, says:
The unemployment rate holding steady at a relatively low 4.3% is not a significant cause for celebration, as the long-standing problems in the UK’s labour market continue to undermine attempts to reignite a flatlining and underperforming economy.
The economic inactivtiy rate, which measures how many people are neither in work nor looking for a job, was estimated at 21.7% in August to October 2024, slightly lower than the 21.8% in July-September.
The agenda
9am GMT: IFO survey of German investor confidence
10am GMT: EU trade balance for October
1.30pm GMT: US retail sales report for November
Updated
