The TUC has urged the Bank of England to call a halt to interest rate boosts after warning that overall job losses in current months have left the UK “teetering on the brink of recession”.
Job had fallen in more than half of Britain’s 20 industrial sectors in the three months to June, the union body declared as it predicted a fresh boost in the cost of borrowing would put tens of thousands more livelihoods in danger.
The TUC’s call for the Bank to remain its hand followed a day in which proof of weakness in the UK manufacturing sector allowed push the pound down against both the US dollar and the euro.
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The umbrella body for trade unions expressed recent labour market data from the Office for National Statistics revealed a general increase in employment of 33,000 in the three months to June, but this masked big job failures in key sectors such as accommodation and food (34,000), wholesale and retail (27,000) and construction (17,000).
In all, the TUC said 120,000 jobs had vanished in 11 separate industries, with “skyrocketing” interest rates as one of the key elements.
The Bank of England’s financial policy committee has increased interest rates at each of its last 13 meetings, bringing the official cost of borrowing from 0.1% to 5% since December 2021. A 14th rise on Thursday is seen as a certainty by the financial markets, with bulk opinion favouring a 0.25 rather than 0.5 percentage point move.
The TUC general secretary, Paul Nowak, stated: “With the country teetering on the point of recession, the last thing we require is another hike in interest rates.
“This will just heap additional misery on households and businesses and put many thousands more jobs and livelihoods at risk. Setting us on course for another economic shock is reckless – not responsible.”
Worries of a recession had already been deepened after the latest snapshot of manufacturing showed the recent downturn in activity deepening last month.
Rates of contraction in factory output, new orders and jobs all accelerated in July, according to the monthly purchasing managers’ index released by S&P and the Chartered Institute of Procurement and Supply (CIPS). Seen as a principle of how the economy will function in coming months, the S&P/CIPS purchasing managers’ index (PMI) fell from 46.5 in June to 45.3 in July. Any reading below 50 indicates the output is falling rather than increasing.
The report stated cash-strapped companies were cutting back on investments and running down their stocks in order to save money.
Rob Dobson, director at S&P Global Market Intelligence, stated: “July saw a deepening of the UK’s manufacturing downturn. Output fell at the fastest pace since January, as overstocked clients, increasing export losses, higher interest rates and the cost of living situation coalesced to create a worrying intensification of the slump in demand.”
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Fhaheen Khan, senior economist at the manufacturing body Make UK, stated: “Today’s results show the economy is on the glide path to anaemic growth with the industry now at risk of facing a recession. Despite supply disruptions easing, and the industry’s capability to meet demand nearing optimal levels, the extra power means little if consumers are no longer in a buying mood.”
The manufacturing PMI for the eurozone registered an even lower reading than that for the UK. The index for the 20 countries using the single currency fell from 43.4 in June to 42.7 in July.
The assumption that the Bank of England will moderate the pace of interest rate boosts following a half-point rise at its last meeting in June meant the pound was trading at a three-week low against the dollar at just over $1.28 and at just over €1.16 against the euro.