Interest Rate Cut Likely as Unemployment Climbs and Wage Growth Slows

Unemployment climbed and wage growth slowed in the three months to May, according to official figures that will put pressure on the Bank of England to cut interest rates next month.

- Phillip Inman

Data from the Office for National Statistics (ONS), released yesterday, showed that Britain's official unemployment rate rose to 4.7% in the three months to May, up by 0.1 of a point from April, to reach the highest level since June 2021.

Pay growth slipped from 5.3% to 5%, as forecast by City analysts. Unemployment had been expected to remain at 4.6%. In the private sector, pay rises were 3.7% on average in May, a sharp fall from 4.3% in the three months to April.

The ONS director of economic statistics, Liz McKeown, said the labour market "continues to weaken".

Against a backdrop of negative economic growth coupled with rising inflation, the figures are expected to give the Bank a headache before its next decision on interest rates on 7 August.

While inflation rose last month to 3.6%, above the central bank's 2% target, Threadneedle Street officials are expected to be more concerned about figures showing the economy contracted by 0.1% in May, adding to a 0.3% decline in April.

Analysts are predicting two further interest rate cuts this year, with the first to take place at the Bank's

"From a financial point of view, last year's budget was worse for hospitality than Covid," says Philip Thorley, pictured, who owns 18 pubs in Kent and employs about 400 people.