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Round-up of the week

Posted on 17th June 2016

Employment rate at record high

The employment rate in the UK has gone up to an all-time high of 74.2 per cent, official data has revealed.

According to the Office for National Statistics (ONS), nearly 31.6 million people were in work during the three months to April 2016.

Meanwhile, the unemployment rate dropped to five per cent - its lowest rate in 11 years.

Stephen Crabb, the work and pensions secretary, has hailed the findings, saying he is "delighted to see another strong set of figures this month".

"There are more people in work than ever before and wages are continuing their upward climb, which is great news for hard-working families who have seen a rise in their living standards over the past year," he commented.

Business community responds to labour market figures

The CBI has welcomed the ONS data, saying the UK labour market "remains in decent health".

However, deputy director-general Josh Hardie pointed out that "pipeline pressures" for employers are building at a time when companies are facing greater uncertainty.

"Firms are facing a number of issues that could add costs; the impact of the introduction of the National Living Wage, the forthcoming apprentice levy and the EU referendum, all against the backdrop of anaemic global growth," he observed.

"So, combined with persistently low productivity, real risks remain for the labour market’s long-term health and UK growth more broadly."

David Kern, chief economist at the British Chambers of Commerce, was more upbeat, highlighting the rising employment and falling unemployment.

He said this suggests the economy might not have "softened as much as feared in the early months of 2016".

"Our flexible and dynamic labour market remains a source of strength for the UK economy," Mr Kern commented.

However, he pointed that the growth in earnings remains muted. As a result, he believes the Monetary Policy Committee at the Bank of England should "persevere with low interest rates".

Sentiment wanes in financial services sector

Optimism in the financial services sector declined during the three months to June - the second quarter in a row in which this has happened.

The latest CBI/PwC Financial Services Survey found that 13 per cent of businesses were feeling more optimistic, while 29 per cent were not as confident. This led to a balance of -16 per cent, compared with -21 per cent in March 2016.

Rain Newton-Smith, chief economist at the CBI, believes this reflects a "mood of caution amongst financial services firms" in the run-up to the EU referendum, as well as continued uncertainty in the global economy.

"When talking to financial services firms, it’s clear that the low interest rate environment, increasing competition and regulatory pressure continue to weigh on profitability," she commented.

“But after a volatile start to the year there are some positive signs, with business volumes continuing to expand and overall employment levels holding up.”

To discuss conditions in the labour market and operating environment further, speak to one of our experts here at The Maine Group!