UK firms cut jobs at fastest pace in five years, wages cool
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UK firms cut jobs at the fastest rate since 2020; payrolls fell by 43,000 in December, double market expectations, per ONS data.
PHOTO: REUTERS
- UK firms cut jobs at the fastest rate since 2020; payrolls fell by 43,000 in December, double market expectations, per ONS data.
- Wage growth slowed to a 3.5-year low of 4.5% (excluding bonuses), impacting BOE decisions on interest rate cuts amid economic concerns.
- Redundancy rates rose, with 21,192 potential redundancies notified in December, signaling a weakening job market despite slight vacancy increases.
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BRITAIN – British firms cut jobs at the fastest pace since 2020 and wage growth eased to its lowest in 3.5 years, more signs of a weakening jobs market as the Bank of England (BOE) considers how much further it can cut interest rates.
Tax data showed the number of employees on payrolls falling 43,000 in December, the month after Chancellor of the Exchequer Rachel Reeves’ tax-raising budget, the Office for National Statistics (ONS) said on Jan 20.
The decline was double market expectations and the largest since 2020, though the figures are often heavily revised. Unemployment based on the ONS Labour Force Survey held at a near five-year high of 5.1 per cent in the three months through November. The pound pared earlier gains to trade little changed at US$1.3429.
Pay growth excluding bonuses cooled to 4.5 per cent in the three months through November, down from 4.6 per cent in the period through October. That was in line with the median forecast of economists, though private sector wage growth eased by more than expected to 3.6 per cent.
The labour market is a key focus for BOE policymakers, who have warned in recent weeks that the downturn may be worsening amid evidence that firms are turning to cutting jobs rather than just holding off hiring. Financial markets are fully pricing in one more rate cut in 2026, with a roughly 70 per cent chance of a second.
It means payrolls have plunged by 220,000 since Ms Reeves ramped up employment costs at her first budget in October 2024.
The health of the jobs market is seen as crucial to determining the scale and speed of interest-rate cuts in 2026. A lacklustre economy, a higher minimum wage, tax hikes and artificial intelligence have all helped dampen demand for British workers.
There were signs that firms are becoming more proactive in cutting jobs, fueling concerns that the downturn is getting worse. The redundancy rate climbed to 4.9 for every 1,000 employees in the three months through November, up from 3.8 in the three months through August. Firms in Britain notified a further 21,192 potential redundancies in December alone, the highest for the month in at least six years, including the pandemic.
However, there was a small increase on vacancies of 10,000 to 734,000 in the three months through December, compared with July to September 2025.
Some rate-setters believe wage growth is not falling fast enough to let up in the fight against inflation. Early feedback from the network of agents who feed on-the-ground information to the BOE suggests businesses will hand out wage rises of 3.5 per cent this year, levels that are not consistent with its 2 per cent inflation target.
Currently traders see little prospect of a move on borrowing costs at the next two meetings and are leaning toward the central bank cutting rates again in April. BLOOMBERG
