Alice Haine, Personal Finance Analyst at Bestinvest, the DIY investment platform and coaching service, comments:
“Britain’s jobless rate edged up to 3.7% in the three months to October while vacancies fell for a fifth quarter in a row indicating that employers are increasingly concerned about the economic outlook as the country edges closer to recession.
“Pay growth remained strong with regular pay, excluding bonuses, and total pay, including bonuses, both rising 6.1% in the three-month period – though this was deeply negative in real terms once inflation of 11.1% is factored in. This means real wages dropped 2.7% in the three months to October for real and total pay – one of the largest falls since comparable records began.
“This data reveals yet another hit to the purchasing power of Britain’s workers who are also contending with soaring prices on the goods and services they consume as well as higher borrowing costs and the biggest tax burden since the Second World War following Chancellor Jeremy Hunt’s raft of tax changes in the Autumn Statement.
"It seems there is little to celebrate for workers in the run-up to Christmas, with the destructive force of inflation on real pay causing industrial action across the country as NHS workers, train and bus drivers, border force agency staff, driving instructors, postal workers and teachers head to the picket line.
“The personal finance misery may only worsen as the nation braces itself for yet another rate hike later this week with the Bank of England expected to increase interest rates by 0.5 percentage points to 3.5% - the highest level since 2008. The country is also facing a long recession with GDP contracting 0.3% in the three months to October making the outlook appear even more grim.
“On the upside, inflation may have already peaked raising the possibility of a less severe recession than feared. However, pay growth is likely to dampen in the months ahead as companies cut costs to keep businesses afloat in challenging conditions, with the jobless rate set to increase further. The quarterly drop in UK vacancies in the August to October period of 65,000 to 1,187,000 – the fifth decrease in a row – signals that companies are already scaling back on hiring amid retreating business optimism.
"The Bank of England expects unemployment to almost double by the fourth quarter of 2025 from its current level with October’s ONS labour data offering a hint of what is to come. Sadly, job losses are commonplace during recessions as companies strive to cut costs or businesses go bust with staff laid off. This will place even more pressure on household finances, with debt levels likely to go up and those in real trouble defaulting on mortgage and loan payments potentially causing a spike in property repossessions and bankruptcies.
“There’s little doubt that 2023 will be a difficult year as the fallout from a year of runaway inflation and rapidly rising interest rates hit businesses and households hard. For households already struggling with higher costs, job insecurity will only add another level of financial stress in these difficult times.”
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