November's Market Insights

Welcome to the November edition of Meridian Insights. I’m sure it won’t have escaped you that this month, the American presidential election captured global attention, with Donald Trump securing a second term. The implications of this shift in the US administration are likely to be felt worldwide, and we will closely monitor how this may affect the UK in the coming months. 

First Labour Budget

In the recent Budget, the Chancellor confirmed sizeable increases to National Minimum Wage (NMW) rates to take effect from April 2025, continuing the trend over recent years. The main National Living Wage (NLW) rate will increase from £11.44 to £12.21 – an increase of 6.7%.

The changes announced in the Budget mean that from April 2025 the new annual minimum wage for someone working 37.5 hours per week will be approximately £23,800. The potential outcome of this is that a greater proportion of the workforce will be paid at the NMW rate. In itself, this increases risks arising from NMW non-compliance, as more workers are likely to be affected.

Single enforcement body

Alongside the increases in NMW rates, we are also seeing an increase in enforcement activity. This is something that may continue under the UK Government's proposed Fair Work Agency, a new enforcement body which will bring together various employment-related enforcement bodies including the NMW unit which currently sits within HMRC. In addition to NMW, the Fair Work Agency will also look at holiday pay which is not currently overseen by an enforcement body. Details on this are still to be confirmed, and we do not know how the Fair Work Agency will operate and how that will differ from the current operations of HMRC's NMW unit. However, the direction of travel appears to be towards greater enforcement.  We understand the Fair Work Agency will not become operational before the 2026 to 2027 financial year.

Labour Market Overview

The latest ONS Labour Market Overview shows that:

• The UK unemployment rate rose slightly to 4.3%, with 1.486 million people unemployed. Unemployment among young people remains high, particularly in the 16-17 age group (24%) and 18-24 age group (13.7%).
• The employment rate saw a slight decline to 74.8%, with 33.31 million people in employment.
• The economic inactivity rate fell slightly to 21.8%, consistent with levels a year ago. There are 9.248 million economically inactive individuals, a small decrease of 6,000 from last year but still 802,000 higher than pre-pandemic levels.
• Job vacancies continued to fall, down to 831,000 – marking the 28th consecutive period of decline. This is a reduction of 35,000 from the previous quarter, though vacancies remain above pre-COVID levels. The ratio of unemployed people per vacancy rose to 1.8 in June-August 2024.
• As of October 2024, payrolled employees numbered 30.4 million, representing a 0.3% increase year-on-year (a rise of 95,000) and standing 1.35 million higher than pre-pandemic levels.
• Annual growth in regular pay (excluding bonuses) was 4.8%, marking the lowest growth rate since 2022, while total pay (including bonuses) grew by 4.3%. Adjusted for inflation, annual growth in regular pay was 1.9%, and total pay was 1.4%.
• The claimant count rose both month-on-month and year-on-year, reaching 1.806 million, representing individuals receiving unemployment-related benefits.
• Redundancies increased slightly to 3.1 per thousand employees, a rise from the previous quarter and from the same period last year.
• October saw 48,000 working days lost to labour disputes, up from 33,000 in the previous month.

The House of Commons latest research briefing on UK Labour Market Statistics has been published. In the year to June to August 2024, employment levels increased, and unemployment fell, while there was a slight increase in economic inactivity. Growth in nominal wages continues to slow but remains high.  

In February 2024, the Office for National Statistics (ONS) reintroduced Labour Force Survey (LFS) data, which also includes a population reweighting. This is after only limited experimental headline data was published between October 2023 and January 2024 due to falling response rates.

The Social Market Foundation is a cross party think tank and registered charity. Their report Recovering the lost workforce explores the barriers that people face getting into work, how these barriers might be addressed and the potential that could be unlocked by doing so. Key findings:

• Over six million people are not employed but wish to work, i.e. 14% of the working population
• If these people were to find employment, UK GDP would increase by £454 billion
• Getting a third of these people into work would meet the government target of 80% employment

The Chancellor has announced a £240 million funding boost to accelerate the rollout of local services aimed at reducing economic inactivity and supporting people back into work. The Get Britain Working package includes tailored work, skills, and health support for disabled individuals and those with long-term health conditions. This intervention comes in response to concerning figures showing the UK as the only G7 nation with higher economic inactivity rates than before the pandemic, with 2.8 million people currently out of work due to long-term illness—a factor holding back productivity and stifling economic growth. 

 The Royal Society of Public Health (RSPH) latest report A Better Way of Doing Business - securing the right to a healthy workplace revealed that nearly half of the UK workforce lacks access to essential health support in the workplace, especially those in lower paid sectors such as agriculture and hospitality. 

Illness and poor health costs businesses over £100 billion a year as staff are off sick, working below full capacity, or forced out of work altogether. There are currently almost three million people out of work due to sickness, many of whom would like to return to the workplace with appropriate support.

Workwell, a new £64 million programme by the DWP and DHSC, launched in October with a pilot in North Central London. For employed individuals at risk of job loss, WorkWell provides workplace health advice, reasonable adjustment reviews, and return-to-work planning.  For unemployed individuals, referrals offer CV support, interview coaching, and guidance on reasonable adjustments with potential employers. 

The upcoming Getting Britain Working White Paper will bring forward locally-led health, work and skills plans to drive down near record 2.8m people out of work due to long term sickness.  It will introduce a new jobs and careers service linking jobseekers with employers, with a focus on skills; integrated work, health, and skills plans led by local authorities and a Youth Guarantee ensuring every young person can earn or learn. These initiatives aim to tackle economic inactivity, support those impacted by long-term sickness, and contribute to the government’s goal of achieving an 80% employment rate. 

A recent survey conducted by law firm Wright Hassall ahead of End Workplace Bullying Day reveals that more than half of UK employees have either left or considered leaving a job due to workplace bullying. Key findings:

• 45% of people believe that their workplace tolerates discriminatory banter at least some of the time
• 1 in 12 admit that their workplace often tolerates discriminatory banter
• One third more women experience bullying and/or harassment from a colleague than men
• 33% would not recommend a job at their organisation.

UK Immigration Policy

The Home Office published the number of people who have been “returned” from the UK from July to the end of October. 9,400 returns were recorded, of which 2,590 were enforced as they had no legal right to remain in the UK. This compares with 2,170 enforced returns over the same period in 2023, an increase of 19%. Of the total returns, 1,520 enforced and voluntary returns were of foreign national offenders (FNOs), this is an increase of 14% compared to 1,330 FNO returns in the same period of 2023.