The unemployment rate has risen to 4.7%, its highest in four years, while the number of job vacancies has now been falling continuously for three years…reports Asian Lite News
The UK jobs market has continued to weaken, making the prospect of an interest rate cut next month even more likely, analysts say. The annual rate of pay growth in the three months between March and May slowed to 5%, according to the Office for National Statistics (ONS).
The unemployment rate has risen to 4.7%, its highest in four years, while the number of job vacancies has now been falling continuously for three years. The government said “we need to go further” to improve the economy, while the Conservatives said the unemployment rise was a “disgrace”.
Earlier this week Bank of England governor Andrew Bailey indicated there could be larger cuts to interest rates if the jobs market showed signs of slowing down. Yael Selfin, chief economist at KPMG UK, said the “slowing pay growth opens the door for an interest rate cut in August”.
The Bank is widely expected to cut rates from 4.25% to 4% at its next meeting, though some say it would be unwise to encourage spending while inflation is still rising. Many analysts have said that April’s rise in employer National Insurance contributions (NICs) has discouraged firms from hiring.
While the unemployment rate has risen, the ONS has said the figure needs to be treated with caution due to problems with how the data is collected. HR director Peter Waller-Flynn says there has been a recruitment freeze in the majority of the 300 businesses he advises across Liverpool.
“Businesses are now coming to us for advice on how to have a much more flexible workforce,” he says. He says other clients are looking at restructuring, salary reviews, four-day weeks, cutting overtime, and replacing permanent roles with “a much more flexible, agency-driven workforce”.
Paul Dales, chief economist at Capital Economics, noted that ONS data shows the number of people on PAYE payroll has fallen in seven of the eight months since Chancellor Rachel Reeves announced the NICs rise. Dales said this trend “clearly shows businesses are offsetting the rises in their costs by reducing headcounts”.
Employment Minister Alison McGovern said that “for people in areas with the highest economic inactivity, we are funding new work to make sure barriers to employment are removed”. Shadow work secretary Helen Whately said “each and every job loss is a devastating blow to hardworking families across the country”, adding “worse is yet to come under this punishing Labour government”.
Liberal Democrat Treasury spokesperson Daisy Cooper said the government must “go for growth by reversing the jobs tax which is stifling small businesses”. The ONS said the number of vacancies fell again to 727,000 for the April to June period, marking three continuous years of falling job openings.
It added that survey data suggested that some firms may not be recruiting new workers or replacing ones who have left. The number of job vacancies is now at its lowest in 10 years, excluding the plunge seen during the pandemic when lockdowns stopped firms from hiring.
JLR to cut jobs
Jaguar Land Rover (JLR) is to cut up to 500 management jobs in the UK, as the carmaker faces pressure on sales and profits from US trade tariffs. JLR said it would launch a voluntary redundancy scheme, and that the cuts were not expected to exceed 1.5% of its British workforce. The firm described the move as “normal business practice”.
Last week, the carmaker revealed a drop in sales in the three months to June caused partly by it pausing exports to the US because of tariffs and also due to the planned wind-down of older Jaguar models. The company warned last month that US President Donald Trump’s decision to impose a 10% tariff on British cars exported to the US would hit its profits.
JLR said it “regularly offers eligible employees voluntary redundancy” and said the current programme was based on “the business’s current and future needs”. It added that the UK-US trade deal on car imports gives it “confidence to invest £3.5bn” per year.
Car industry expert Professor David Bailey of the Birmingham Business School said the tariffs “play a big role” in the job cuts. “It wasn’t that long ago that JLR was reporting bumper profits – £2.5bn profit to the year ending in March – which was its best results in a decade,” he told the BBC’s Wake Up to Money programme.
The firm has also been taking on workers in preparation for producing more electric cars so the tariffs “have definitely had an impact”, he said. As part of a wave of tariff announcements made by Trump earlier this year, UK exports of UK cars and automotive parts faced an extra 25% tax, on top of an existing 2.5% levy. This led to JLR pausing shipments of its vehicles to the US.
However, the UK-US deal saw the tariff cut to 10% for a maximum of 100,000 UK cars, which matches the number of these vehicles that the UK exported last year. Despite this, Prof Bailey said the new rate is still “a big increase” from the previous tariff of 2.5%, adding that one of its best selling cars, the Defender, is made in Slovakia and that still faces a 27.5% tariff.
Downing Street rejected “absolutely” any suggestion that JLR’s job cuts were a personal embarrassment for Sir Keir Starmer, who visited the company in May and declared it was his intention to protect British jobs in the car industry. A spokesperson for the PM said the UK-US trade deal was “jobs saved, not job done”, adding that JLR was “responding to challenging global conditions” in making the cuts.
