As the United Kingdom is anticipating Brexit, many of its economic sectors are struggling, particularly because there is still no deal to define the exact relationship the UK will have with the rest of the European Union after the divorce. However, amid all of that uncertainty wages in the United Kingdom have had their best three-month combined growth since the 2008 economic crisis, increasing by 3.5%. The unemployment rate is also at its lowest level in decades, down to 3.9%. This indicates that British employers are hiring more employees and are paying them more.
However, while wage growth seems like a good economic indicator in the short term, investors are worried that this is just a hedging tactic that British employers are using to mitigate the risks associated with Brexit. Economists expect that the United Kingdom will take a hard hit even if it leaves with a deal, but the lack of clarity is scaring employers away from more sustainable investments. Normally companies will be expected to invest in technology, for example, which can help businesses expand in the long term. However, they are choosing to spend their profit on hiring more people, because if a post-Brexit recession hits the United Kingdom, they can simply lay off all the extra workers and carry on.
The unemployment info will give us more indication as to the Bank of England’s future course of action when paired with tomorrow’s reports on inflation growth in the United Kingdom.
