Is Britain gripped by worklessness? Economic inactivity hits a 13-year high

Daily Business News

Political Insight Aug 13

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Worklessness has risen again: the number of people out of work and not looking for a job surpassed 9.5m in the three months to June according to the Office for National Statistics. This so-called economic inactivity, now representing 22.2% of the working age population, is the highest since 2011. 2.8m are out of work due to long-term sickness, which is also close to record levels. Chancellor Rachel Reeves said in response to the data: “Today’s figures show there is more to do in supporting people into employment because if you can work, you should work. This will be part of my Budget later in the year where I will be making difficult decisions on spending, welfare and tax to fix the foundations of our economy so we can rebuild Britain and make every part of our country better off”. Work and Pensions Secretary Liz Kendall described the latest data as “yet more evidence of the dire inheritance we face” with “millions of people denied the support they need to get work and get on at work, harming their opportunities and holding back growth,” she said. “This Government will deliver the change the country is crying out for by making work pay, transforming skills, overhauling jobcentres and giving local areas the power they need to drive jobs and growth”.

Other ONS data released this morning:

· The unemployment rate fell to 4.2% in the three months to June, down from 4.4% in the previous three months. As unemployment had been expected to rise to 4.5%, the drop pushed up the value of the pound as it reduces the likelihood of the Bank of England cutting interest rates again at its next meeting in September. Sterling was up 0.3% against the US Dollar to top $1.28.

· The number of job vacancies in the UK decreased by 26,000, to 884,000, for the three months to June. Estimates for the number of payrolled employees in the UK increased by 14,000 between May and June.

· Wage growth has slowed to the lowest level in nearly two years. Pay excluding bonuses grew by 5.4% in the three months to June; including bonuses it was up 4.5%, down from 5.7% in the previous period, although this was heightened by payments of one-off bonuses to NHS staff last year.

Heathrow Airport says the introduction of a £10 Electronic Travel Authorisation (ETA) charge for passengers travelling through the hub has been "devastating," costing the airport 90,000 transfer passengers on routes operating to and from the seven countries included in the scheme. In 2023, the previous government ruled citizens of Qatar, Kuwait, Oman, the United Arab Emirates, Saudi Arabia and Jordan without a legal residence in or a visa to the UK must pay the ETA cost when changing planes in the UK. It was introduced, the Governemnt said at the time, to “strengthen the security of our border and improve travel” as part of “our transformation and digitisation of the UK border”. The ETA is also set to be rolled out for EU, European Economic Area and Swiss nationals early next year. Heathrow said: "We urge the government to review the inclusion of airside transit passengers. Every little bit of extra competitiveness that the government can deliver for aviation will help deliver vital growth for the whole of the UK economy". However, despite the ETA charge, Heathrow also reported this morning it had 7.98m travellers in total in July, up 4.2% year-on-year, a tally which made it Europe's busiest airport during the first six months of the year. Its year-to-date total of 47.81m passengers was also 6.9% higher, and the airport surpassed a weekly passenger total of 1.8m for the first time in its history last month, doing so for three consecutive weeks from 8^th July.

The Universities Superannuation Scheme (USS) has acquired 3,000 homes from Blackstone for £405m. The UK’s largest pension fund bought the portfolio of shared ownership homes from affordable housing company, Sage, which is majority-owned by Blackstone alongside real estate investor Regis. Blackstone’s UK residential portfolio numbers around 20,000 homes.

Rumours Boris Johnson could become Global Editor in Chief of The Telegraph are reported widely this morning. The former PM is said to have had discussions about the role as part of former Tory chancellor Nadhim Zahawi’s takeover bid for the media group, which also includes The Spectator magazine, which Johnson used to edit. Zahawi is assembling a consortium to buy The Telegraph as part of the current auction process. However, a source close to Johnson – a former columnist and Brussels correspondent for the Telegraph - downplayed the talks, telling the Telegraph that no “substantial” discussions had taken place about a possible job if Zahawi’s bid is successful. Zahawi has not commented on the story. Rival bidders include Sir Paul Marshall, the hedge fund tycoon who bankrolls GB News and newspaper titan David Montgomery. Two unidentified overseas investment groups are also understood to be in the running. Last week, it emerged Lord Saatchi, the former advertising mogul, had a £350m offer turned down. Daily Mail Lord Rothermere has ruled himself out.

China: Foreign investors pulled a record $14.8bn (£11.6bn) out of China between April and June, data from the State Administration of Foreign Exchange shows. It was only the second time more foreign money has been withdrawn from China than invested since records began in 1998, The Telegraph notes, adding that the exodus was a “massive swing” from the net $10bn pumped into the country during the first three months of the year. Duncan Wrigley, chief China economist at Pantheon Macroeconomics, told the newspaper he thought Western businesses exporting to the US have been “nearshoring” production to friendlier states such as Vietnam and Mexico in order to reduce risks to their supply chains. “Companies who have got export factories are worried about geopolitical tensions with the US,” he said, adding: “On top of this, domestic consumer demand in China has been anaemic since the country reopened after lockdown, as the nation’s property crisis has eroded people’s wealth and hit confidence… There has been a limited return of spending in some areas like tourism and there is just not as much appetite for buying big items as before”. Max Zenglein, chief economist at the Mercator Institute for China Studies, said: “The Chinese government is struggling to build confidence overall in the economy, and there is an expectation that geopolitical frictions are going to rise. There might be collateral damage in response to, for example, measures like the EU imposing tariffs,” all of which means “the pipeline of new investments into China is drying up”.

Royal Mail parent International Distribution Services (IDS) has announced that its parcel services subsidiary, GLS, is to sell its US freight divisions to California-based DC Logistics. According to Reuters, the divestment would include GLS US Freight and GLS US Business Solutions. IDS did not disclose the financial terms of the transaction, which is set to complete by 1^st September. GLS’ freight services in other markets remain unaffected by this sale.