Jobs Foundation: UK in a ‘serious jobs recession’
Matthew Elliott, president of the Jobs Foundation, has warned the UK has suffered the steepest fall in payrolled employment since the pandemic, putting the country into a ‘serious jobs recession’.
Elliott says:
“Today’s figures confirm that the UK is now in the midst of a serious jobs recession. The steepest fall in payrolled employment since the pandemic is a serious wake up call to the Government.
“The hike to Employer NICs has had the predicted damaging impact on jobs, and businesses are now worrying about further tax rises to come in the Autumn Budget.
“Welfare reforms have already been U-turned on, and now jobs are going too. If the Government is serious about getting people back to work, the Chancellor must deliver a pro-growth, pro-jobs plan in the Autumn Budget.”
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Updated at 09.57 BST
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Tax take from non-domiciled and deemed domicile taxpayers rises by 2%
Juliette Garside
HMRC has just published its yearly stats on Britain’s non-doms, my colleague Juliette Garside reports.
This globally mobile, high earning group is the topic of hot debate after suggestions, often from low-tax lobbyists, that the abolition of tax breaks they previously enjoyed has driven many away from the UK.
The stats show the numbers claiming the non-dom tax break, combined with those who declared themselves as deemed domiciled, was 83,000 in the 2023-24 financial year. This represents a fall of 1% from 83,900 on the previous year.
Deemed domicile is the group who have been resident too long to claim the tax break – except for inheritance tax purposes.
There were 9,100 newly arrived non-doms in the year, a fall of 5,100 on the previous year, which saw a bump as travel opened up again after the pandemic. This was offset by a fall in those claiming non-dom status, and 500 fewer deemed domiciled taxpayers.
The amount of tax collected from these two groups rose: their combined contribution was £12bn, a 2% increase on the previous year, with most of that money collected through income taxes.
Photograph: HMRC
Despite the spin about non-doms abandoning London’s wealthiest postcodes, the numbers themselves don’t yet show an impact from policy changes. Conservative chancellor Jeremy Hunt’s clampdown, which removed the right to shelter non-UK income from UK taxes, was announced in March 2024, just two weeks before the end of the end of the period covered by today’s statistics.
Labour’s full abolition of non-dom regime, which removed the right of those with a trust offshore to avoid UK inheritance taxes, only came into effect in April this year.
There is no sign of an exodus just yet, says Arun Advani, director of the Centre for the Analysis of Taxation, explaining:
“These stats are from before the current reform, covering only a couple of weeks after Jeremy Hunt’s announcement, so can’t tell us anything about impacts on migration.
“A tax increase of this magnitude will surely lead some people to leave, as we saw last time. That is still consistent with the reform raising serious money, as those who stay pay a lot more. We’ll get the first solid number on who left after the reform in the summer of 2027.”
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Bundesbank chief defends Powell against Trump attacks
Germany’s top central banker has ridden to the defence of US Federal Reserve chair Jerome Powell, who has faced persistent attacks from Donald Trump.
Joachim Nagel, the head of Germany’s Bundesbank, has warned against interfering with the independence of central banks.
Nagel said:
“Independence of central banks is the DNA of central banks.
So I believe it is dangerous to play with the independence of a central bank.”
Trump has repeatedly criticised Powell for not cutting US interest rates since his return to the White House, claiming that the Fed funds rate should be several percentage points lower.
Yesterday, Trump insisted it was “highly unlikely” he would dismiss the Fed chair, after a report that he was on the verge of firing Powell triggered a stock market selloff.
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Hospitality industry suffers ‘devastating’ job losses
The UK hospitality industry is alarmed that more than half the fall in payroll numbers last month was due to job losses in accommodation and food services.
As covered this morning (see earlier post), payrolls across the accommodation and food service activities sector has fallen by 108,000 employees over the last year, out of 178,000 in total.
Kate Nicholls, chair of UKHospitality, says:
“These devastating job losses are a direct consequence of policy decisions at last year’s Budget, which have disproportionately hit the hospitality sector.
“The change to employer NICs in particular, was socially regressive and had a disproportionate impact on entry level jobs. Without a change of tack from the Government we could be looking at even more job losses in hospitality, when we should be bringing people into the jobs market.
“We desperately need to see action at the upcoming Budget. We urge the Government to act on our asks to fix NICs, by extending the existing exemptions to include both young people and people moving from welfare to work, which will boost jobs and help to reverse this huge loss.
“We also need to see lower business rates to revive high streets, and a VAT cut on hospitality to drive investment. We have seen time and time again that our sector is extremely capable of meeting the Government’s growth and employment objectives, if given the optimal operational environment. This is why we need our asks met, before we are taxed out.”
Photograph: ONSShare
Updated at 11.45 BST
Eurozone inflation rate confirmed at 2.0%
We have confirmation this morning that consumer prices are rising more slowly in the eurozone than in the UK.
The eurozone inflation rate was 2.0% in June, new data from statistics body Eurostat shows, in line with its initial ‘flash’ estimate.
That’s bang in line with the European Central Bank’s target, as well as lower than the UK’s inflation rate of 3.6%.
The lowest annual rates were registered in Cyprus (0.5%), France (0.9%) and Ireland (1.6%). The highest annual rates were recorded in Romania (5.8%), Estonia (5.2%), Hungary and Slovakia (both 4.6%).
Food, alcohol & tobacco prices were up 3.1% over the last year, while services prices were 3.3% higher. Industrial goods inflation was just 0.5%, while energy prices were 2.6% lower than a year ago.
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FTSE 100 rising towards record highs
Shares are higher in London this morning, despite the gloomy feeling created by today’s jobs report.
The FTSE 100 index of leading blue-chip shares is up 43 points, or 0.5%, at 8970 points.
Diploma, the technical products distributor, is leading the risers, up 6.6%, after upgrading its organic growth forecast for this financial year.
Lloyds (-3%), Whitbread (+2.3%) and Kingfisher (+1.8%) are also in the top risers.
Budget airline easyJet (-5.2%) are leading the fallers, after warning that its profits will be hit by a recent rise in fuel costs, and industrial action by French air traffic control this month.
Today’s rise takes the ‘Footsie’ back towards the record intraday high of 9,016.98 points set on Tuesday morning.
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Analysis: jobs market cooling but not collapsing
Richard Partington
Anaemic economic growth, rising inflation, and a worsening outlook in the jobs market. If the inheritance from the Conservatives had been bad, the situation a year in to the new Labour government do not look much better, my colleague Richard Partington writes.
The latest figures show unemployment nudged up to 4.7% in May, hitting the highest level in four years, while wage growth slowed for a third consecutive month, and employers cut back on hiring.
Given the cocktail of economic concerns facing Britain, a slowdown in the labour market is hardly surprising. Employers are facing higher costs from inflation, tax rises and elevated interest rates; squeezed consumers are not rushing to spend, and Donald Trump’s trade wars are clouding the outlook.
However, it would be remiss to describe the slowdown in the jobs market as a capitulation. Despite the clear pressures, wage growth remains surprisingly resilient and redundancy rates, although elevated, are not rocketing.
More here.
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Small firms: Jobs plunge demands ‘a head-out-of-the-sand response from government’
The Federation of Small Businesses has blamed Rachel Reeves’s business tax hikes for the weakening UK labour market.
Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), points to the increase in employers’ NICs rates, as well as the government’s employment rights bill, saying:
“Today’s disturbing figures add to a weight of evidence that if you make it more expensive and riskier to give someone a job, the result will be fewer jobs. More people are already being locked out of opportunities, the benefits bill will rise even further, and the growth and prosperity we so desperately need will become more out of reach.
“Ramping up jobs taxes, pushing through 28 new bits of employment legislation, and then on top of that mooting a hike in employer pension costs, is not a recipe for job-creation and economic growth. Innovative, ambitious and compassionate small employers, who want to grow and create good opportunities for people, are absolutely up against it, with sky-high costs of doing business and a stagnant economy.
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Charlie McCurdy, economist at the Resolution Foundation, reckons the Bank of England faces a tricky dilemma on interest rates in August.
McCurdy says:
“The jobs market continues to weaken and has now shed 143,00 employee jobs over the past seven months. This weakness is starting to show up in lower wage growth, with the recent pay recovery rapidly running out of steam.
“The latest jobs data presents a clear case for lowering interest rates. But higher than expected inflation muddies the picture. The Bank’s decision next month is far from straightforward.”
Bank of England governor Andrew Bailey indicated earlier this month that the Bank could make bigger cuts to interest rates if the job market slows too quickly. However, the jump in inflation in June may worry hawkish policymakers.
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There’s been a worrying rise in the number of workers being threatened with redundancies.
The number of potential redundancies increased by 17% last month compared with May, while the number of employers proposing redundancies increased by 2%, new realtime data from the Office for National Statistics shows.
On an annual basis, the number of potential redundancies increased by 68% compared with June 2024 and the number of employers proposing redundancies increased by 42%, according to the Insolvency Service HR1 forms.
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Jobs Foundation: UK in a ‘serious jobs recession’
Matthew Elliott, president of the Jobs Foundation, has warned the UK has suffered the steepest fall in payrolled employment since the pandemic, putting the country into a ‘serious jobs recession’.
Elliott says:
“Today’s figures confirm that the UK is now in the midst of a serious jobs recession. The steepest fall in payrolled employment since the pandemic is a serious wake up call to the Government.
“The hike to Employer NICs has had the predicted damaging impact on jobs, and businesses are now worrying about further tax rises to come in the Autumn Budget.
“Welfare reforms have already been U-turned on, and now jobs are going too. If the Government is serious about getting people back to work, the Chancellor must deliver a pro-growth, pro-jobs plan in the Autumn Budget.”
Share
Updated at 09.57 BST
UK government borrowing costs are rising this morning, as traders digest the ‘ugly picture’ painted by today’s jobs data.
The yield, or interest rate on UK tw0-year bonds touched their highest level since 9 July. They rose by 5 basis points in early trading to 3.904%, up from 3.877% last night, before slipping back.
Five-year gilt yields hit their highest level since mid-June, up 4 basis points to 4.093%, before nudging back down to 4.08%
XTB’s Kathleen Brooks explains:
European bond yields are rising today; however, the UK is an outlier, and bond yields are rising faster than our European peers.
Rising yields suggest that bond investors might be starting to shun the UK after economic data released in recent days paints an ugly picture of the UK economy.
Falling GDP, rising inflation and a weak labour market could trigger more underperformance of the UK bond market compared to our peers over the rest of the summer.
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Another sign of labour force weakness: the number of unemployed people per vacancy rose to 2.3 in March to May 2025, up from 2.0 in the previous three months.
This is the highest level in almost a decade, if you strip out the disruption caused by the Covid-19 pandemic
The ONS explains:
Recent increases are because of the continued decline of vacancies and an increase in unemployment in recent periods. The last time the number of unemployed people per vacancy was 2.3 or more before the pandemic was in January to March 2016.
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XTB: UK data paints ugly picture of economy
Today’s UK jobs data paints an “ugly picture” of the economy, warns Kathleen Brooks, research director at XTB.
She explains:
UK labour market data for the three months to May showed another decline in the number of payrolled employees (see here), and a rise in the unemployment rate (see here).
The UK economy shed 25,000 employees in May and a further 41,000 for June, this brings the total number of UK job losses in the past year to 178k, which will be uncomfortable reading for the government.
This does not mean that people have left the workforce completely, they may be working off the books, setting up their own businesses, or working as contractors. However, in the 3 months to May, the unemployment rate rose to 4.7%, which is the highest rate since 2021.
The relentless rise in the unemployment rate is a further sign that the UK economy is creaking and could become the sick man of Europe.
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