𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Rachel Reeves’ economic strategy is backfiring and leaving the Bank of England in an impossible position, financial experts have warned, after UK unemployment jumped to its highest level in four years and wage growth slowed again. Figures released by the Office for National Statistics (ONS) revealed the jobless rate rose to 4.7% in the three months to May — the highest since summer 2021 and above economists’ forecasts of 4.6%.

PAYE payrolled employees fell by 41,000 in June, marking the eighth consecutive month of decline and bringing total job losses since Labour’s October Budget to 317,000. Wage growth also slowed to 5% excluding bonuses, the weakest figure in nearly three years, while job vacancies dropped for the 23rd time in a row, down 56,000 to 727,000.

The figures follow last week’s data showing GDP shrank by 0.1% in May, after a 0.3% fall in April, and Tuesday’s surprise inflation rise to 3.6% — all of which suggest a worsening economic outlook and rising pressure on the Bank of England.

Harry Mills, Director at Oku Markets, said the latest data had “chucked it down” on Ms Reeves’ already fragile economic credibility. He said: “Wave after wave of poor economic data piles the pressure onto our already teary-eyed finance chief.

“UK unemployment rose to 4.7% in May, above the forecast of 4.6% and marking the third straight month of rising joblessness. PAYE payrolled employees dropped by 41,000 in June, continuing an eight-month run of declines. This means that 317,000 jobs have been lost since Labour’s tax-hiking October Budget.

“This caps off a dire week for the UK economy. This leaves the Bank of England stuck between delaying rate cuts to tame prices or easing policy to support a weakening economy; a dilemma that’s likely to weigh further on the pound.”

David Belle, Founder and Trader at Fink Money, described the situation as “simply staggering.” He said: “It is quite unbelievable that Reeves thought increasing the Employers’ National Insurance contributions burden on businesses would be good.

“It’s very likely the tax take is lower, as it’s been proven to be with capital gains bringing in less after the increase. The Bank of England is now dealing with a seriously big conundrum. Do they cut rates and risk inflation shooting higher or do they wait and see further growth stagnation?

“This falls firmly at the feet of the Treasury and Chancellor. The UK is a complete basket case right now.”

Samuel Mather-Holgate, Independent Financial Adviser at Mather and Murray Financial, said Ms Reeves needed to reverse course urgently. He said: “Reeves needs to rethink her policy of bashing business with super high taxes. A reversal of the jobs tax can’t come soon enough to release the pressure around the neck of UK plc.

“This is the clearest warning sign for the Chancellor she won’t get growth if she’s taxing the machine that creates it. It’s also a headache for the Bank of England, who will have to decide what’s more important; higher inflation or a stagnant economy. Their interest rate decision could hang in the balance.”

Anita Wright, Chartered Financial Planner at Ribble Wealth, said the central bank was now forced to choose between two bad options. She said: “Do they prioritise fighting a recession, which clearly seems to be on the horizon, or do they stay focused on controlling inflation, which is starting to tick up again?

“The Bank of England will begin cutting interest rates to cushion the downturn. But by doing so, it risks re-accelerating inflation. In other words, we don’t need an external energy shock this time like in the 1970s — the monetary response itself will act as the trigger.”

Michelle Lawson, Director at Lawson Financial, said the latest figures would come as no surprise to businesses. She said: “Today’s release will not be a shock to anyone running a business, but it will be a serious shock to our Government. I just cannot fathom why they are creating such carnage with wild abandon and ignoring all the experts with everything they do.”

Ben Perks, Managing Director at Orchard Financial Advisers, added: “Eight consecutive months of declining payrolls. This government have made it unattractive to scale up and employ more staff. They need to flip their approach on its head.”

Ranald Mitchell, Director at Charwin Mortgages, said: “Growth doesn’t come from squeezing employers, it comes from backing them. Right now, the Government is doing the opposite, and the jobs market is flashing warning lights.”

Ms Reeves will today meets fellow finance ministers in South Africa, when she will say: “In a changing world, I am determined Britain leads by example as a beacon of stability.

“Our plan for change is delivering the strong foundations needed to drive prosperity for working people at home, while we build a more resilient economy that works in our national interest abroad.”