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The Bank of England’s ability to set effective interest rates is being hampered by unreliable labor market statistics, according to Governor Andrew Bailey, who has highlighted the lack of accurate data on the UK workforce as a “substantial problem”.
Speaking at Mansion House to an audience of city funders, Bailey raised concerns about the inability of the Office for National Statistics (ONS) to obtain sufficient responses for the Labor Force Survey, which has plagued data collection over the past 18 months. This lack of reliable information on employment status has forced the Bank to rely on alternative data measures when making crucial monetary policy decisions.
“The challenges of the Labor Force Survey are widely recognised,” Bailey said. “It is a substantial problem – not just for monetary policy – if we do not have a clear insight into labor participation. We could certainly benefit from more UK involvement in the ONS survey efforts.”
Bailey’s comments underline his growing frustration with Britain’s inability to maintain robust workforce data. He highlighted that the Bank, alongside the Treasury and other key stakeholders, continues to work closely with the ONS to improve the quality of UK employment data.
While other advanced economies have seen a re-entry into the labor market after the pandemic, Britain has suffered a decline in labor force participation, a trend that Bailey said could hamper economic performance. The ONS has tried to tackle the problem by expanding the number of participants in the survey from 44,000 in 2022 to 59,000 this year, although it has warned users not to rely too heavily on Short-Term Labor Force Survey data for decision-making.
Bailey emphasized that understanding labor supply dynamics is essential for measuring Britain’s overall economic capacity, which is further strained by Brexit-related trade restrictions, energy price shocks and sluggish investment.
Investment boost for the British economy through a reform proposed by the Lord Mayor
At the same Mansion House event, Alastair King, Mayor of London, proposed reforms to the UK’s individual savings accounts (Isas) that would encourage investment in domestic assets. King urged the government to incentivize investors, suggesting full tax relief could depend on funds targeted at Britain-focused investments.
“Redirecting money from non-productive to productive assets could scale up UK businesses, boost returns for savers and increase market participation,” King said. His proposal, which he argued would not require additional government funding, aims to bring UK practices in line with international counterparts.