The Bank of England is under increasing pressure this week to cut interest rates as job vacancies and factory output show signs of a slowing economy.
According to the Recruitment and Employment Confederation (REC), vacancies fell by 3.2% in August, with almost 720,000 new advertisements. This reflects the sluggish labor market as UK factory output has contracted for the first time since late 2020.
Separate data from manufacturing industry body Make UK shows manufacturers are reluctant to hire due to falling industrial production, underscoring wider economic concerns. This contraction marks the first decline in factory output in four years, further strengthening calls for a further cut in interest rates.
The Bank of England’s monetary policy committee (MPC) meets on Thursday to discuss interest rates. Last month, the MPC cut the base interest rate from 5.25% to 5%, the first cut in four years, as part of efforts to support economic growth. However, Bank of England Governor Andrew Bailey has called for caution, warning that interest rates should not be cut too quickly or too sharply to ensure continued progress in reducing inflation.
Despite the economic slowdown, investors currently expect the Bank of England to keep interest rates stable this week. Andrew Bailey’s cautious stance reflects a balancing act between supporting growth and maintaining control over inflation.
Noting the wider impact on the labor market, REC Chief Executive Neil Carberry said: “There is no doubt that the labor market remains sluggish compared to previous years, with the summer holidays also impacting the pace of hiring.”
As the UK economy navigates this period of uncertainty, all eyes will be on the Bank of England’s decision and the potential impact on businesses, consumers and the wider economic landscape. Pressure to ease monetary policy is tempered by the need to support progress on inflation, making this week’s interest rate decision a crucial moment for Britain’s economic outlook.