The U.K.’s labor market conundrum

This report is taken from this week’s CNBC UK Stock Exchange newsletter. Like what you see? You can subscribe here.

A quartet of big players tends to dominate industry commentary. It includes Robert Waltersa £95m professional recruitment company, is named after its founder.

Slightly larger, valued at £209 million threeIts position is the science, technology, engineering and mathematics sectors. Another is Page groupvalued at £769m, which operates across professions including accountancy and law.

It’s still bigger Hayeswhich is valued at £925m, is perhaps the most diversified of the four in terms of its offerings and global reach. It is known for its work of hiring staff on a temporary basis – although four in 10 people it hires are permanent staff.

Regardless, it has an interesting and checkered history, dating back to 1867 and the Hays Wharf warehouse on the south bank of the Thames. It became one of the UK’s largest conglomerates after acquiring Farmhouse Securities, the country’s largest independent supplier of chilled and frozen foods, in 1981.

The farm was run by Ronnie Frost, an enthusiastic businessman who had been a successful poultry merchant in Smithfield (London’s world-famous wholesale meat market), and a self-deprecating self-described “chicken salesman”. He led a management buyout of Hays from the Kuwait Investment Office in 1987 and made it a FTSE 100 giant with activities including distribution, document and postal storage, as well as recruitment.

After Frost retired in 2001, with conglomerates becoming largely unfashionable, other parts of the company were sold and Hays became a recruitment and staffing-focused company.

As such, it is a much smaller organization than it used to be, but nonetheless, its comments will be eagerly searched for clues about the state of the UK labor market when it updates investors on recent trading on Friday.

Such clues are rare at present due to questions about the quality of data provided by the Office for National Statistics (ONS), which has had to Publication delay For a number of key statistical updates, including inflation, trade and producer price data.

No single statistical release has been questioned as much as the Labor Force Survey (LFS), which is used to calculate the UK unemployment rate and inform the Bank of England’s Monetary Policy Committee (MPC) when it comes to setting interest rates.

Several members of the Monetary Policy Committee have expressed dissatisfaction with the quality of the Labor Force Survey data, including Governor Andrew Bailey, who said in November last year: “It is… Big problem “And not just for monetary policy when we don’t know how many people are participating in the economy.”

These issues have been known since October 2023, when the Office for National Statistics suspended the publication of survey data, citing a sharp decline in responses after the pandemic.

The Financial Times earlier this year published internal emails from that period, including one from Richard Hayes, deputy chief economist at the Office for National Statistics, in which he warned colleagues that the sample size for one side of the survey was “It collapsed to just five individuals“, causing one data point to move by 30%.

A spokesperson for the Office for National Statistics told CNBC that it has been open and transparent about these issues, and that the strategic plan is now underway. “We are currently refocusing resources on our core economic outcomes,” they said.

This is a shocking waste of human capital, and it is alarming that the numbers are rising; The Times reported last Friday that 5,000 working-age Britons are being moved onto long-term sickness benefits every working day, putting the UK on a spending spree. 100 billion pounds sterling annually These payments will be made by the end of the contract.

While there are widespread suspicions that the system is being rigged – it is easy to find guides online and so-called “sick influencers” offering advice on how to make a successful claim – the government was forced by MPs to reverse modest cuts to such benefits earlier this year. Financial circumstances may force her to try again in the near future.

Meanwhile, despite falling for the 38th consecutive quarter, there are still an estimated 728,000 job openings in the economy, indicating a notable skills shortage in some areas. This helps explain why average income, excluding bonuses, was up 4.8% – making the MPC somewhat uncomfortable.

This skills shortage may increase as the UK tightens its visa regime, and at the same time, many entry-level graduate jobs are disappearing due to the uptake of artificial intelligence.

The UK jobs market has often confounded economists, which was not the case after the global financial crisis, when unemployment remained low as workers accepted lower income growth in exchange for job security.

It remains difficult to explain today, which is why Hayes and his peers will continue to attract disproportionate attention — and not just from investors.

BYD’s UK sales rose 880%, making it the electric car maker’s biggest market outside China. Chinese electric car maker BYD It sold 11,271 cars in the UK last monthThis represents significant year-over-year growth, the company said on Monday.

‘The system is rigged’: Founders and VCs comment on UK ambition deficit. British youth are being criticized because of them Obvious lack of entrepreneurial drivesparking a wider debate about whether the UK startup scene is facing a lack of ambition.

PRO: ‘Never been stronger’: Investors pile into UK stocks as next US alternative. UK FTSE 100 index It rose 6.7% in the three months to the end of September, marking the London index’s second-best quarter in five years. Investors are taking notice.

– Holly Eliatt

Shares listed on the London Stock Exchange rose last week, with FTSE 100 index Adding about 1.4% since last Tuesday. The index touched a record high on Monday as stocks rose around the world, shrugging off concerns about a US government shutdown.

sterling It rose 0.3% against the US dollar over the week amid dollar weakness, as investors eye political developments across the Atlantic.

Return on the index 10 gilded years The stock price rose on Tuesday, trading nearly 4.727%, up from 4.697% a week ago, as bond traders responded to political uncertainty after… French Prime Minister Sebastien Lecornu resigned on Monday.

-Tasmin Lockwood