Bank of England governor Andrew Bailey has warned that the UK jobs market is showing signs of slowing as employers react to higher national insurance contributions (NICs). Speaking at a London British Chambers of Commerce event, Bailey said businesses are beginning to scale back hiring and curb pay rises in response to the increased costs.
The Bank’s Monetary Policy Committee (MPC) will consider the impact of lower employment and weaker wage growth when it meets in August to decide on the interest rate, which currently stands at 4.25%. Bailey, who voted to hold rates steady earlier this month, said he had seen “a bit more evidence” of employers adjusting pay and staffing levels following NIC changes in the last budget.
Recent data highlights a fragile economy. GDP grew by 0.7% in the first quarter but fell by 0.3% in April. PAYE figures show more than 100,000 jobs were lost in May – the largest monthly decline since the first COVID lockdown in 2020.
Private sector wage growth has also eased, falling to 5.1% in the three months to April, down from 5.9% earlier in the year. A split vote at the Bank’s June meeting – with three members backing a cut to 4% – suggests growing momentum for a rate reduction. Markets now expect rates to fall to 3.75% by the end of the year.
Bailey concluded that underlying economic growth remains weak and will likely stay subdued as firms face global uncertainty, including US trade measures.
Get in touch to discuss your business.
