Closing post
Time to recap…
The chair of Thames Water has admitted its finances were “hair raising”, as he said bosses were in line for “substantial” bonuses linked to an emergency £3bn loan.
The UK’s biggest water company came within just five weeks of running out of money, Adrian Montague told MPs on Tuesday.
“Thames in the last year has come very close to running out of money entirely,” he said. He added there were times where it only had weeks’ worth of cash left.
“Running a £20bn corporation on five weeks’ liquidity, honestly, it’s hair raising,” he said.
Montague also said some executives at the struggling water company were in line for payouts amounting to “50% of salary, very substantial bonuses” as part of the high-interest emergency debt package, which was approved by the high court in February.
During the hearing, chief executive Chris Weston also warned that he couldn’t guarantee there wouldn’t be restrictions on water use this summer, but was confident that Thames wouldn’t run out of water.
Weston said the crisis at Thames had been ‘decades in the making’, due in part to a lack of leadership and turnover in the boardroom.
Montague insisted that the new team was committed to fixing the problems at Thames.
Elsewhere today…
Inflation in the US has dropped to a four-year low in April, the month that Donald Trump announced his sweeping “liberation day” tariffs on the US’s largest trading partners.
The annual inflation rate was 2.3% in April, down from an annual rate of 2.4% March, according to a new inflation report from the Bureau of Labor Statistics (BLS).
The unemployment rate in the UK has risen to its highest level in almost four years, according to official figures, as the jobs market continues to slow.
The Office for National Statistics (ONS) said the rate was 4.5% in the first three months of this year, up 0.2% on the previous quarter and the highest reading since summer 2021.
The ONS also reported that UK wage growth slowed, as firms reduced their vacancies and cut the number of staff on their payrolls.
Wall Street has opened higher, as investors welcome the drop in US inflation today.
The S&P 500 share index gained 0.64%, up 37 points at 5,881 points.
The tech-focused Nasdaq has risen by over 1%.
The drop in inflation may be reassuring traders that the Federal Reserve will have space to cut interest rates this, if it needs to stimulate the US econonomy.
The Dow Jones industrial average is in the red, though, down 119 points at 42,290.86 points. It’s been dragged down by UnitedHealth (-13%), which today announced that CEO Andrew Witty was quitting immediately for “personal reasons” as it suspended its annual outlook.
Starling Bank probed over reporting failings
Starling Bank has been ordered to launch an external review and boost compliance training after CMA said it had concerns about an “underlying weakness” in the online lender’s procedures.
The challenger bank’s breaches related to data it fed into customer satisfaction surveys, which it regularly tops.
It was found to have excluded 17% of personal account customers from data handed to a market research company in both 2023 and 2024, and also overstated the total number of accounts held by customers to the competitions regulator between 2020-2023.
It comes months after the bank was hit with a £29m fine by the Financial Conduct Authority in October 2024, over “shockingly lax” controls that the FCA said left the financial system “wide open to criminals”. That included failures in its automated screening system for individuals facing government sanctions.
The CMA said on Tuesday that excluding a large number of customers from the data was a “material breach”, and while the impact on the rankings was likely “negligible”, it risked undermining consumer confidence in the survey results.
The CMA said it was “concerned that there may be an underlying weakness in Starling Bank’s procedures.” It added:
“The CMA has concerns that formal action may be necessary to prevent a recurrence. This is because Starling Bank has now breached the requirements to provide full data on current account holders twice and we are not convinced that Starling Bank is capable of preventing further breaches through the initiatives mentioned above.”
Starling said that the exclusions were due to a lack of appropriate oversight, and that the over-reporting was a misunderstanding of the regulatory requirement. Starling itself notified the CMA of the breaches last year and was called into the regulator in November to discuss the matter.
The bank has now been issued with directions that include hiring an external firm to carry out a review of its processes and procedures, and will now have to provide extra compliance training for staff.
Starling said in a statement:
“Last year we identified some reporting errors related to the CMA’s customer satisfaction surveys. We informed the CMA of our findings, we apologised, and we changed our processes to prevent a recurrence. We are pleased that the CMA has now determined that the impact on customers was ‘negligible’ and that the bank has overpaid rather than underpaid its dues.
We will continue to work constructively with the CMA because we share their goal of ensuring that people can see which banks are listening to their customers and meeting their needs.”
MPs also heard today that Thames Water’s senior executives will receive large “retention incentives” funded through the £3bn emergency loan it agreed recently.
Chair Sir Adrian Montague told the EFRA committee that the deal “required” Thames to create a retention plan for its senior management team, which he called “our most precious resource”.
That plan will pay out in three installments – when the first restructuring plan is agreed, then when the second restructuring is agreed, and then a larger amount at the end of the process.
The first two installments are worth 50% of salary, which Montague agrees is “very substantial”.
He reveals its the first time he’s encountered this sort of deal.
And he denied that Thames was swayed to choose the funding offer from its A-class creditors, rather than a rival offer, at a lower interest rate but no such retention scheme, from B-class shareholders.
Customers should take into account that they are not paying these bonuses, Montague insists:
This amount will be funded by the lenders, and at the end of the day borne by the lenders.
It’s hard to see much impact from Trump’s tariffs in today’s inflation report, says Heather Long, the Washington Post’s economics columnist.
You can see the 0.2% inflation increase in April.
— Heather Long (@byHeatherLong) May 13, 2025
Yes, it's a jump from March, but April was in line with recent trends.
Commodity prices up just 0.1% in April
New car prices flat
Used car prices down -0.5%
Apparel prices down -0.2%
It's hard to see much impact from Trump's… pic.twitter.com/Ny0k3bLvHW
CPI inflation was 0.22% MM in April. Core CPI grew 0.24% MM. Apparel prices (-0.2%) & new car prices (-0.01%) both fell in April. Core commodity prices grew more slowly than overall CPI, such that relative core commodity prices ticked down slightly. Not much sign of tariffs here pic.twitter.com/Ghqyo2gmT4
— Ernie Tedeschi (@ernietedeschi) May 13, 2025
The drop in US inflation in April suggests that the tariffs are yet to feed through to inflation, says Seema Shah, chief global strategist at Principal Asset Management, adding:
Yet, it is questionable whether or not today’s CPI print really moves the needle after the rollercoaster ride of the past month. After all, not only is the April CPI report unlikely to have fully captured the tariff impact post-Liberation Day, but inflation numbers will now be further whipsawed by the US/China trade truce announcement.
An inflation impulse will likely come through during late Q2, but may be partially and quickly eroded if container traffic rapidly resumes in light of the drop in US/China tariffs. The implication is that a clear read on the inflation trend won’t be visible for several months yet. This prolonged inflation uncertainty likely implies a prolonged Fed pause. “
Donald Trump will be pleased to see inflation has managed to ease slightly in the US, says Lindsay James, investment strategist at Quilter.
But the US is “far from out of the woods” when it comes to inflation, James adds:
The first quarter of the year saw businesses ramp up their inventories as they looked to stockpile ahead of ‘Liberation Day’. As such, price rises are very much delayed, and we can still expect inflation in the US to spike because of these policies. This is, of course, why the Federal Reserve is reluctant to cut interest rates at this point.
The reprieve for Chinese goods will likely lead to some more re-stocking before the end of the 90-day period. But while tariffs are much reduced since yesterday, they remain markedly higher than before the 2nd April. The ‘Art of the Deal’ means no-one knows how permanent these tariffs may become, if at all, or if they will be reintroduced in a less harsh form. However, businesses will become increasingly wary of the shifting sands beneath their feet as these deadlines approach. Given we are already almost at the halfway point of Trump’s 90 day pause for the ‘reciprocal tariffs’ on other nations, we may soon see them building in more margin through price rises to protect themselves from sudden changes in policy making.
Tariffs are not the only thing weighing on inflation either, however, and there remain some other underlying factors that aren’t changing as quickly. Food prices in the US remain elevated despite Trump’s campaigning to lower those pressures for consumers.
Today’s inflation figure may paint somewhat of a sanguine picture, but scratch lightly under the surface and it is clear the US faces a number of risks. With economic growth slowing at the same time, the Fed is left in a bind of where to go from here. Risk of policy misstep, therefore, is growing and as such market volatility remains very much on the table.”
US inflation drops to four-year low
Newsflash: US inflation was lower than expected last month, despite fears that tariffs will push up costs.
On an annual basis, US consumer price inflation fell to 2.3% in April, down from 2.4% in March, the lowest reading since February 2021. Economists had expected the rate would be unchanged.
US CPI inflation 2.6% - the lowest since Feb 2021 pic.twitter.com/KMXqlOQjn2
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) May 13, 2025
This might cheer Donald Trump, and bolster his claim that he is easing the price pressures hitting US households.
The Bureau of Labor Statistics (BLS) reports that food prices rose by 2.8% over the year, while energy prices were 3.7% cheaper than a year ago. Shelter (housing costs) rose by 4% year-on-year.
During the month, prices rise by 0.2% in April, having dropped by 0.1% in March.
The BLS says:
Indexes that increased over the month include household furnishings and operations, medical care, motor vehicle insurance, education, and personal care. The indexes for airline fares, used cars and trucks, communication, and apparel were among the major indexes that decreased in April.
Updated
The Bank of England’s chief economist, Huw Pill, has underlined his concerns about wage growth, suggesting it might mean rates have to stay higher for longer.
Speaking at a conference at the London School of Economics today, he said he was concerned about the upside risks to inflation, which might get stuck above the Bank’s 2% target.
Pill said that could, “mean that the response of monetary policy, in order to ensure that we get back to our target within a reasonable cycle, needs to be somewhat more aggressive or more persistent in itself.”
Jaguar Land Rover has welcomed the US-UK trade deal announced last week, after reporting its highest annual profit in 10 years.
JLR posted a £2.5bn pre-tax profit in the year to 31 March, its highest profit in a decade.
The company is pleased that the UK has negotiated down tariffs on cars exported to the US, saying:
In April, at the start of the new financial year, we implemented a series of short-term actions to address the immediate impact of trade tariffs introduced by the US Administration on the global automotive sector. On 8 May 2025 we welcomed the positive announcement of a US-UK trade deal. This reduces US trade tariffs on UK auto exports to the US from 27.5% to 10%, within a quota of 100,000 vehicles. This deal brings greater certainty for our sector and stakeholders.
We will continue to engage with the UK Government on the detail of the trade deal. Our priority is to ensure we deliver for our global clients and protect EBIT through delivery of transformation and efficiency initiatives.
Thames Water’s CEO concedes that the company has run up “extremely high” costs on advisors, which total around £159m.
That bill reflects the fact Thames is the “largest restructuring of a balance sheet in British history”, Chris Weston says.
Life would be “extremely difficult for everyone” if Thames Water falls into a special administration regime (effectively nationalisation), its chair told MPs.
Adrian Montague suggested that suppliers might wonder how much longer they wanted to work for Thames; senior management might also consider their position, and there would be a considerable burden on government, who could face £5bn of extra costs, and would need to eventually find a buyer for the business.
Touching again on Thames’s cash squeeze, Sir Adrian Montague says the company’s liquidity was very tight when it was negotiating with lenders recently.
Having only five weeks liquidity “is a nightmare” for a large company such as Thames, Montague says.
But, he insists, Thames was in a “beggers can’t be choosers situation” when it was negotiating the deal to provide a £3bn lifeline.
Montague adds:
We were running along the edge of the precipice, and we had to secure the financial future of the company.
MPs have also quizzed Thames Water’s top brass about its future ownership.
Chief executive Chris Weston told the committee it was still a “very fluid situation”, despite investment firm KKR having been chosen as the sole bid to invest in the company.
He says there is still a possibility that Thames could go back to other interest parties if “if the current process fails”. Other options are that creditors step in, and execute a debt-for-equity swap.
Or, there is a possibility the company could still fall into public ownership.
Weston says:
“It’s a very fluid situation but those both are possibilities.”
“There’s no guarantee we would not stay on a market-led solution as opposed to a special administration, but it is a very fluid situation and those are all possibilities.”
Montague: We're here to put things right
Sir Adrian Montague then refuses to give a commitment to Helena Dollimore MP that the Thames Water top team at the committee hearing (him, CEO Chris Weston, and CFO Steve Buck) will remain in place through this parliament.
We live in a competitive marketplace, Montague points out, adding:
We have to live in the real world. No-one will give you a commitment that will be no change in the leadership team over five years. It is simply not possible.
Q: So how can we have any faith in the commitments you are making?
“We are the new kids on the block,” Montague declares, adding “We are making progress. We are here to try to put things right.”
We won’t quit until the job is done, but it is not realistic to say there will be no changes in the team over 5 years.
Q: Why would headhunters recruit from a failing company?
“It’s not a failing company”, Montague fires back, “it’s a company in recovery”.
We are making progress. This is a good team. You can see how the progress is starting to become apparent.
Committee chair Alistair Carmichael seems unimpressed, asking:
Q: If a 40% rise in pollution incidents is a sign of success, what does failure look like?
Montague says “We must go back into those pollution incidents”.
Updated
Thames Water chair Sir Adrian Montague then defends the company’s controversial decision to pay dividends, rather than investing in improving its infrastructure.
Montague says Thames decided to pay the ‘intergroup’ dividend, of £157m, in October 2023 so it could keep discussions about future capital injections with then-shareholders alive.
“In the event, that failed”, he admits. But at the time, Thames didn’t know it wouldn’t work.
Helena Dollimore MP points out that a better use of that would have been to mend pipes, or to fund the 100 infrastructure projects that were delayed in summer 2023.
UPDATE: Montague may have his dates mixed up here. The Guardian reported last June that this £150m dividend was agreed in March 2024, having already faced investigation for paying a £37.5m dividend in October 2023, for which it was fined.
Updated
Thames CEO Chris Weston then feels more heat over his bonus payments.
He reveals that Thames’s front-line staff can qualify for bonuses worth 3%-6% of their salary, while Weston can earn 156% of his salary in a bonus.
Weston concedes that “it is a lot of money”, but argues that Thames must offer competitive packages to attract and retain the staff it needs.
Labour MP Helena Dollimore says there is a “clear discrepancy” here, and that if Thames was truly committed to improving its infrastructure it would have more focus on the morale of front-line staff, and support them better.
Thames chair: we got hair-raisingly close to running out of money
Thames Water’s chair has admitted to MP’s that the company came worryingly close to running out of money in the last year.
Tackled over Thames’s decision to delay 100 vital infrastructure projects, to prevent storm overflows and pollution incidents, in August 2023, Sir Adrian Montague reveals
He says:
Thames in the last year has come very close to running out of money entirely.
There were times in the last year when we had five weeks of liquidity.
Running a £20bn corporation on five week’s liquidity is “hair-raising”, Montague says.
He explains that the decision to delay those projects was the start of a process to fight a “funding crunch”, as “we felt we needed to conserve cash”.
Montague denies that the money was used on bonuses, which he says are necessary to retain staff.
Thames Water bosses grilling by MPs pretty startling so far.
— Ashley Armstrong (@AArmstrong_says) May 13, 2025
As chair Sir Andrew Montague just said “running a £22 billion company on just five weeks cash - is pretty hair raising… the cash box was nearly empty”.
Justifies paying bonuses to bosses to “keep talent”
Updated
Thames CEO: Confident we won't run out of water this summer, but...
Thames Water is taking steps to prepare for a possible drought this summer, its CEO insists (even though its desalination plant at Beckton is still out of action).
Chris Weston tells MPs on the EFRA committee that Thames has four levels of drought awareness, and has just raised that level from zero to 1.
That means:
Thames is checking all its reservoirs are as full as can be – they are currently 94% full now, and the company is trying to top them up.
it is going through all its plants to ensure all critical maintainance is done before the summer
It will also start to communicate the importance of conserving water to customers.
Weston says:
At the moment, from what I can see, we have learned the lessons from the situation in 2022 and we are doing all that we need to at the moment to prepare for water shortage.
I hope that is not necessary.
Q: How confident are you that you won’t run out of water this summer?
Weston replies that he is confident Thames won’t run out of water. But, he’s not confident that it won’t have to restrict usage, as that will depend on weather and rainfall.
Updated
MPs then tackle Thames Water about the problems with its water desalination plant in Beckton, east London.
CEO Chris Weston confirms that the plant, which is designed to turn salty seawater into fresh drinking water, will be out of action again this year, despite fears there could be a drought.
Weston says the desalination plant, which cost £250m, is a big problem, and reveals he wonders why it was built (!).
He tells the EFRA committee:
It is not a good story, it was not a good investment. There are no excuses about it.
Updated
Thames chair: We should apologise for not serving customers well enough
Thames Water’s chairman, Sir Adrian Montague, tells MPs that there is a “vast amount to be done to bring performance up to scratch”.
City grandee Montague, who was appointed in summer 2023, says:
We know we are letting customers down. We know that pollution, spills, supply interruptions cause inconvenience and sometimes real hardship.
He adds that a discussion about Thames’s turnaround plan should start by achnowledging that the company “haven’t always served our customers as well as we should, and through the committee apologising to them”.
That turnaround is starting to yield “real progress”, Montague insists, saying that green shoots are there – citing improvements on supply interruptions, and water quality.
It’s such a big business, you can’t hope to put everything right straight away. You’ve got to choose your targets, and little-by-little improve it overall.
Q: Staff are worried about the future, because of the uncertainty over Thames’ ownership. Can you guarantee that their jobs, pay, terms and conditions will be maintained?
CEO Chris Weston swerves away from the word “guarantee”, as he doesn’t know how things will change.
But, he insists, he sees a growing employee base, over the last year and over the next five years. Staff should take comfort from that, he argues.
However, it would be “more difficult” if Thames Water falls into a special administration regime – but even then, jobs should be protected as Thames must keep providing services.
Weston goes on to criticise short-term decisions to cut staff in the past, which undermined its performance.
He promises to fight for jobs, if Thames’s new owner pushes for efficiency savings, saying:
I will fight for every job in Thames.
Thames CEO: Crisis is decades in the making
MPs then turn to the BBC’s recent (revealing) documentary into the Thames Water crisis.
Q: Why did CEO Chris Weston tell the BBC that “I won’t know how it got this way”, after 10 months at the company? What’s his analysis today?
Weston replies that he has a pretty clear idea now, and was also pretty clear then, but questions the value of “talking about it publicly and pointing the finger” [in which case, why allow TV cameras into the company?!].
Weston tells the EFRA committee there are “many authors” responsible.
He says:
I’m clear how we got here. This has been decades in the making, the crisis we face at Thames.
I think all actors had a role to play in this.
Absolutely, the company and management has got something wrong. Five chief executives in five years is not a recipe for success, and I would argue consistency in leadership is a very important part of what we need to do now.
But, Weston also takes aim at the UK’s regulatory regime, saying it is flawed.
Regulators need to attract investment into the sector, and allow companies who are in trouble to turn around and improve – Weston argues that it doesn’t do that at the moment.
Thames CEO defends £190,000 bonus
Thames Water CEO Chris Weston is then tackled about his decision to accept a £190,000 bonus after three months at the company.
Q: Was that a wise thing to do, given your focus on providing leadership?
Weston says his remuneration was agreed with the board before he joined.
By and large, he says, people do recognise the magnitute of his job.
And he insists that he did “make a difference” in his first three months.
Weston says he started to put a new organisation structure in place, and started to give Thames staff “confidence and reassurance” that they could take pride in their job.
That helped to stabilise the company, and I think that was important.
Thames Water CEO: We lost direction
Thames Water chief executive Chris Weston has blamed “confusion” and a lack of direction from previous bosses for the problems that have beset the company.
Testifying to the Environment, Food and Rural Affairs Committee this morning, Weston says he has been making progress since becoming CEO 16 months ago.
He explains:
“Where it had gone wrong is that Thames has lost direction a bit.”
Weston tells the committee he was the 5th CEO appointed in five years, and that 26 members of the executive team had changed in that time.
That churn has created “a confusion for people in the company,” Weston explains, insisting that Thames staff weren’t unwilling to do their job or take on accountability.
He says he has provided clearer direction at the company, created a better organisation structure and a governance structure to allow him and the board to understand performance at the company,.
Weston says:
“I want the people in the company to feel that they have clear direction, they have the right resources and they are supported in what they do.
My job is to make them feel supported and confident in what they are doing.”
Weston also tells MPs he was “very impressed” with Thames’s performance when he joined the company:
“2.6bn litres of clean water every day, 5bn litres of waste dealt with every day. I couldn’t help but be impressed, coming from outside the industry”.
And he adds that he is “quite pleased with the progress we are making” at the company.
(one which became notorious for sewage spills, a push for higher bills, and a debt pile that threatens its future).
Weston cautions, though:
It’s going to take a long time to turn Thames around.
Updated
Over in parliament, MPs are digging into the crisis at Thames Water.
The Environment, Food and Rural Affairs Select Committee (EFRA) are quizzing top brass at the water company – CEO Chris Weston, chair Sir Adrian Montague CBE, and CFO Steve Buck.
You can watch it here.
Our session with @thameswater has started.
— EFRA Committee (@CommonsEFRA) May 13, 2025
Watch it live: https://t.co/qxmtOxNOFX https://t.co/q0LTSBLynY
MPs are planning to cover the following issues…
Leadership and culture at the company
Recent court case and appeal
Current ownership
The future of Thames Water
Thames Water’s selection of KKR as its preferred bidder
Price review, performance, and penalties
Returns to investors and profitability
Executive pay and bonuses
UK pub chain Marston’s has swung back to a profit in the first half of its financial year, thanks to a busy Christmas and Mother’s Day, as well as a tighter focus on costs.
The pub owner reported a pre-tax profit of £19m in the 26 weeks ended on 29 March, compared with a loss of £0.2m in the comparable period in 2024.
That was largely driven by a sharper focus on costs, as revenue was broadly flat at £427.4m. But more recent sales growth has been much stronger thanks to a busy Easter season: like-for-like sales in the 5 weeks since 29 March grew by 10.5%. Chief executive Justin Platt has said he is “excited for the summer months ahead”.
Shares in Marston’s bounced by as much as 6.4% in early trading on Tuesday.
Updated
Goldman Sachs: US recession less likely as tariff rates fall
Goldman Sachs has lowered its estimate for the likelihood that the US economy falls into recession in the next year, following an easing in trade war tensions.
Economists at Goldman have cut the chances of a US recession in the next 12 months to 35%, down from 45%.
The move follows the agreement reached by the US and China yesterday to sharply reduce tariffs for the next 90 days. That deal means US importers will only pay a 30% tariff on imports from China, down from 145%.
Goldman now forecast the US economy will grow by 1% during 2025, twice as fast as the 0.5% previously forecast.
The bank says:
Their revised forecast reflects a combination of a lower effective tariff rate and the recent easing of financial conditions.
A month ago, Goldman raised the odds of a US recession to 45% from 35%, after Donald Trump announced a swathe of tariffs on trading partners – which have all now been paused while trade negotiations take place.
Goldman has also lifted its forecast for gains on the US stock market this year, saying:
We raise our S&P 500 return and earnings forecasts to incorporate lower tariff rates, better economic growth, and less recession risk than we previously expected. Our new 3- and 12-month returns forecasts are +1% and +11%, indicating levels of 5900 and 6500 (previously 5700 and 6200).
Warm weather in the UK has helped drive demand for DIY and gardening equipment, retailer Wickes has reported.
Wickes reported a 9.6% rise in revenues in the 17 weeks to 26 April, which it partly credits to decent weather in recent weeks.
Wickes tells the City:
We have been well positioned to benefit from the warmer weather at the start of this year, which has supported the strong sales performance in Retail. For example, in the week of the early May bank holiday we had our biggest ever week for sales of compost and top soil.
Wickes strikes a cautious note, though, adding that “the consumer outlook remains uncertain and the business faces significant cost headwinds”.
M&S reveals some customer data taken in cyber attack
Marks & Spencer has revealed that “some personal customer information” was taken during the cyber-attack which hit the retailer last month.
In a statement on LinkedIn, M&S adds that there is “no need for customers to take any action”, as the information does not include usable card or payment details.
The company has told the City:
Today, we are writing to customers informing them that due to the sophisticated nature of the incident, some of their personal customer data has been taken.
M&S says it will prompt online customers to reset their passwords when they next log in, adding:
Everyone at M&S is working around the clock to get things back to normal for customers as quickly as possible, and we are very sorry for any inconvenience they have experienced. Our stores remain open as they have throughout.
M&S has been battling the disruption caused its cyber-incident for more than three weeks. It was forced to halt all orders through its website and apps at the end of April.
At the start of May, the Information Commissioner’s Office said it had received reports from Marks and Spencer, and also the Co-op Group, which was also hit by a cyber attack.
Updated
The largest employment falls were seen in UK retail and hospitality in the last quarter, reports Stephen Evans, chief executive of Learning and Work Institute (L&W).
Evans adds:
Pay growth is fastest in those sectors as the rise in the minimum wage takes effect. That, along with rises in national insurance and other changes, may show the pressures employers are facing. Time will tell whether this is an indicator of a broader slowdown or a temporary effect.”
“Time will tell whether this is an indicator of broader slowdown or a temporary effect.”
— Learning and Work Institute (@LearnWorkUK) May 13, 2025
✍️ L&W’s @Stephen_EvansUK comments on employment falls in the #retail and #hospitality sectors shown in today’s #labourmarket stats from @ONS.https://t.co/gfWc3BpqDz
According to the ONS, the number of employees in the accommodation and food services sector has fallen by 107,000 in the year to April, while there was an 87,000 rise in employees in the health and social work sector.
Updated
The increased cost of hiring workers in the UK is continuing to dampen the job market, according to the Institute of Directors.
Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, says:
“Today’s figures indicate declining employer demand for labour in the UK job market, with the number of payrolled employees decreasing on the month by 0.1% and vacancies falling by 42,000 on the quarter.
“The business case for hiring has been weakened by a perfect storm of last month’s increased employer National Insurance Contributions and above-inflation increases to the minimum wage, alongside a wave of measures in the Employment Rights Bill which will make hiring staff riskier and costlier.
“If the government is to achieve its aim of an 80% employment rate, it must take urgent action to restore business confidence in hiring. We urge the government to support targeted changes to the Employment Rights Bill which would ensure that the Bill works for both businesses and employees.”
Economists: cracks appearing in UK jobs market
Economists are concerned that the UK’s jobs market appears to have cooled in recent months, judging by today’s labour statistics.
Suren Thiru, ICAEW economics director, fears the employment market is cooling, saying:
“April’s drop in payrolled employment and unemployment rate increase suggests that cracks in the labour market are widening as the double whammy of rising National Insurance and National Living Wage hit employers, exacerbated by elevated global uncertainty.
“While wage growth remains uncomfortably high, the downward pressure from a struggling economy, softening jobs market and rising employment costs should help put pay settlements on a firmer downward path.
“Although more difficult times lie ahead for the jobs market with sinking business confidence and rising employment costs likely to drive a modest rise in unemployment, any increase should be limited by longstanding employer concerns over skills shortages.
“This growing softness in the labour market is unlikely to be sufficient to persuade rate setters to depart from their current approach to gradually cutting interest rates, given lingering concerns over inflation and heightened global uncertainty.”
Paige Tao, economist at PwC UK, suggests the weakening jobs market could spur the Bank of England towards further interest rate cuts:
“If last month’s labour market data hinted at an early response to upcoming employer tax rises, this month’s figures confirm a clearer weakening. Unemployment ticked up for the first time in four months by 0.1 percentage point, payrolled employment fell by 33,000, and vacancies dropped further — staying below pre-pandemic levels for a second straight month. Heightened uncertainty around U.S. tariffs have likely added to the drag on business confidence.
“Wage growth has cooled, with annual earnings including bonuses easing by 0.2 percentage points in March — suggesting fading inflationary pressures from pay in advance of April’s tax changes. As the Bank of England continues to balance inflation risks with growing weakness in the UK growth outlook, today’s figures may indicate a green light for another rate cut at next month’s MPC meeting.”
Lindsay James, investment strategist at Quilter, fear today’s jobs report may be “the start of the expected slowdown”, adding:
The unemployment rate ticked up slightly to 4.5% in January to March 2025, while payrolled employee numbers fell by 47,000 between February and March 2025 and by 63,000 between March 2024 and March 2025. Job vacancies also dropped by 42,000 on the quarter to 761,000 in February to April 2025, marking the 34th consecutive quarterly decline.
“Growth in regular pay, excluding bonuses, fell to 5.6% between January and March 2024, as did total pay, including bonuses, which dipped marginally to 5.5%. Despite the slight fall, with inflation currently at 2.6%, wage growth is still outpacing inflation at more than double the rate.
UK unemployment rate highest since summer 2021
The UK’s unemployment rate has risen to its highest in almost four years, today’s labour market data shows.
At 4.5% in January-March, the jobless rate for those aged 16 and over was the highest since June-August 2021, when it was also recorded at 4.5%.
⚠️ The single-month UK unemployment rates for Feb & Mar have been the highest since the pandemic. Even if we stay around these single month rates, the official UK unemployment rate is heading to at least 4.6%. Risks are skewed towards 5% earlier than the BoE forecasts $GBP pic.twitter.com/v7US8o0sU8
— Viraj Patel (@VPatelFX) May 13, 2025
Nicholas Hyett, investment manager at Wealth Club, says:
“The UK Labour market is painting a bit of a mixed picture. On the one hand unemployment is a touch higher than last month and vacancies are also shrinking. On the other, wages continue to grow well ahead of inflation, with sectors like retail, hotels and restaurants showing particular wage strength.
That doesn’t bode well for businesses in the labour intensive hospitality and retail sectors - with higher wages and looming tax change both likely to push up costs. Fortunately a broad rise in wages suggests the consumer will be able to stomach some extra costs from higher prices.
Key event
Here are more key facts from this morning’s jobs report:
The UK employment rate for people aged 16 to 64 years was estimated at 75.0% in January to March 2025. This is above estimates of a year ago, but largely unchanged in the latest quarter.
The UK unemployment rate for people aged 16 years and over was estimated at 4.5% in January to March 2025. This is above estimates of a year ago, and up in the latest quarter.
The UK economic inactivity rate for people aged 16 to 64 years was estimated at 21.4% in January to March 2025. This is below estimates of a year ago, and down in the latest quarter.
Introduction: UK jobs report shows wage growth slowdown, as vacancies drop
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Wage growth across the UK has slowed, and the number of people on payrolls has fallen, as Britain’s jobs market continues to cool.
The latest UK labour market data, just released, shows that average regular earnings (excluding bonuses) rose by 5.6% in January to March 2025, down from 5.9% in the previous quarter.
Growth in pay including bonuses also slowed – it rose by 5.5% in January-March, down from 5.7% in the final three months of 2024.
In January to March 2025, average weekly earnings were up 5.6% on the year excluding bonuses and 5.5% including bonuses. Regular pay grew fastest in the retail and hospitality sector.
— Office for National Statistics (ONS) (@ONS) May 13, 2025
Read the release ➡️ https://t.co/fGCmGWT23L pic.twitter.com/nubYNHu2bY
Although wages growth slowed, earnings are still rising faster than prices in the shops. Once you adjust for inflation, pay (both regular and total) rose by 2.6% per year on both measures.
Minister for Employment, Alison McGovern has said:
“Real wages are growing with around 200,000 more people into work since the publication of our Get Britain Working plan.
“But we know that the Government’s Plan for Change needs more workers – in every part of our country. That’s why we will continue to change Jobcentres, invest in British industry, and get help to those who need it until everyone who can work has got a decent job and a good income.”
But, today’s report also shows a drop in demand for workers, as UK companies adjust to the increase in the minimum wage, and higher national insurance contributions, which kicked in at the start of April.
The Office for National Statistics reports that the number of payrolled employees felled by 33,000 in April, following a 47,000 drop in March.
On an annual basis, there were 106,000 fewer payrolled employees in April than a year ago, the ONS estimates.
In another sign that firms are being cautious, the number of vacancies in the UK fell by 42,000 in the January-March quarter, the 34th consecutive quarterly decline in a row. The biggest fall came in the construction sector
There were 761,000 job vacancies in February to April 2025, down 42,000 on the quarter, with the biggest fall coming from construction.
— Office for National Statistics (ONS) (@ONS) May 13, 2025
Read the release ➡️ https://t.co/OcuWFq6v95 pic.twitter.com/mpc98cz5fP
ONS director of economic statistics Liz McKeown says:
“Wage growth slowed slightly in the latest period but remains relatively strong, with public and private sectors now showing little difference.
“The broader picture continues to be of the labour market cooling, with the number of employees on payroll falling in the first quarter of the year. The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months.”
The agenda
7am BST: UK labour market report
10am BST: ZEW survey of eurozone economic confidence
10am BST: Environment, Food and Rural Affairs Committee (EFRA) to quiz the CEO, CFO and Chair of Thames Water
1.30pm BST: US inflation report for April
