UK Employers Cut Jobs at Fastest Pace in Nine Months as Oil Prices Surge
UK payrolls fell by 26,000 in August, the sharpest decline in nine months, while vacancies dropped to a five-year low of 702,000. Oil prices climbed above $100 a barrel after disruption to Saudi Arabia's pipeline, raising inflation and interest rate concerns. Goldman Sachs expects the Bank of England to raise rates in November, adding to cost pressures for businesses and consumers.
The August payroll contraction of 26,000 marks a clear deterioration in the labour market, with the redundancy rate climbing to 3.9 per 1,000 employees and youth unemployment reaching its highest point since 2014. Wage growth has also cooled, with average total earnings rising just 3.9% and private-sector pay increases lagging at 2.9%, suggesting workers are losing ground against inflation.
Business investment remains notably weak, with only 17% of firms increasing capital spending in the second quarter, the lowest reading since the pandemic. The Bank of England is reportedly considering adjustments to its gilt-sales programme, potentially excluding long-dated bonds from active sales, as rising borrowing costs make quantitative tightening more expensive.
Households and small businesses may face a double squeeze: weaker job security and slowing wage growth coincide with rising energy and mortgage costs, potentially straining disposable incomes and payment reliability. Younger workers appear especially vulnerable, which could dampen consumer spending and delay major purchases. SMEs extending credit may need to tighten monitoring of customer accounts as insolvency risks rise, while higher interest rates could further cool investment and hiring across retail, hospitality and construction sectors.