TUC urges Bank of England to halt ‘reckless’ interest rate increases
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The TUC has urged the Bank of England to call a halt to interest rate increases after warning that widespread job losses in recent months have left the UK “teetering on the brink of recession”.
Employment had fallen in more than half of Britain’s 20 industrial sectors in the three months to June, the union body said as it predicted a fresh increase in the cost of borrowing would put tens of thousands more livelihoods at risk.
The TUC’s call for the Bank to stay its hand followed a day in which evidence of weakness in the UK manufacturing sector helped push the pound down against both the US dollar and the euro.
The umbrella body for trade unions said recent labour market data from the Office for National Statistics showed an overall increase in employment of 33,000 in the three months to June, but this masked big job losses 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 disappeared in 11 separate industries, with “skyrocketing” interest rates one of the key factors.
The Bank of England’s monetary policy committee has increased interest rates at each of its last 13 meetings, taking 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 majority opinion favouring a 0.25 rather than 0.5 percentage point move.
The TUC general secretary, Paul Nowak, said: “With the country teetering on the brink of recession, the last thing we need is another hike in interest rates.
“This will just heap further 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.”
Fears of a recession had already been heightened after the latest snapshot of manufacturing showed the recent downturn in activity deepening last month.
Rates of contraction in factory output, new orders and employment 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 guide to how the economy will perform 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 output is falling rather than rising.
The report said cash-strapped companies were cutting back on purchases and running down their stocks in order to save money.
Rob Dobson, director at S&P Global Market Intelligence, said: “July saw a deepening of the UK’s manufacturing downturn. Output fell at the quickest pace since January, as overstocked clients, rising export losses, higher interest rates and the cost of living crisis coalesced to create a worrying intensification of the slump in demand.”
Fhaheen Khan, senior economist at the manufacturing body Make UK, said: “Today’s results show the economy is on the glidepath to anaemic growth with industry now at risk of facing a recession. Despite supply disruptions easing, and industry’s ability to meet demand nearing optimal levels, the extra capacity means little if consumers are no longer in a buying mood.”
The manufacturing PMI for the eurozone recorded an even lower reading than that for the UK. The index for the 20 countries using the single currency dropped from 43.4 in June to 42.7 in July.
Speculation that the Bank of England will moderate the pace of interest rate increases 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.
