The chances of a cut to UK interest rates next month have risen, following this morning’s data showing a rise in unemployment and a slowdown in wage growth,The City money markets now indicate there’s a near-75% chance that the Bank of England lowers interest rates to 3,5% at its next meeting, in March, up from 69% last night,Investors now fully expect two rate cuts by Christmas, which would bring Bank Rate down to 3,25%.

James Smith, developed markets economist at ING, says today’s UK jobs report keeps the Bank of England “firmly on track” for a March rate cut.Smith says:Unemployment is up and hiring surveys are still getting worse.That said, the weakness is still heavily concentrated in consumer-facing industries – a legacy of last year’s sizable payroll tax (National Insurance) and National Living Wage increases.Hospitality payrolled employment may be down almost 3% since the start of 2025, but it is still 2% higher than pre-Covid levels.Yet economic output is still 6% below – suggesting the loss of jobs may have further to run.

Outside of these consumer-centric industries, the story looks more benign.Employment is still trending down across the wider private sector on a three-month average of payrolls growth, but only slightly.We’re also not seeing a particularly noticeable pick-up in redundancies across the economy.Vacancy numbers have stopped falling, too.Yael Selfin, chief economist at KPMG UK, says the fall in pay growth to 4.

2% strengthens the case for a March interest rate cut:“Today’s data raises the prospect of the Bank of England resuming cutting interest rates in March,The MPC will be reassured by further evidence of pay pressures easing, and the labour market continuing to soften,The Bank may also want to minimise downside risks to the labour market and lower rates ahead of the next forecast meeting in April,“Headline pay growth eased in December, falling from 4,4% to 4.

2%.The fall in headline pay was partly driven by an easing in public sector wage settlements, which fell for the first time since July 2025.Demand for labour remains weak which has curtailed workers’ bargaining power, meanwhile falling costs for households should also temper pay demand amongst workers.We expect pay growth to fall to 3% by the end of 2026.As is chart show, UK pay growth has slowed notably in recent months.

Regular pay (ie, excluding bonuses) growth has dropped to 4.2% in October-December 2025, down from 5.9% in the same quarter a year ago.That has pushed down growth in real wages (ie, earnings after CPIH inflation) to just 0.5% in the final quarter of 2025, down from 2.

4% in October-December 2024),The weakness of the pound this morning helped to push the UK’s stock market towards a new record high,The FTSE 100 share index rose as high as 10,528 points, up 54 points, only seven points off its all-time peak set last week,A fall in the value of sterling typically boosts the share prices of multinational companies listed in London, as it makes their overseas earnings more valuable,Fawad Razaqzada, analyst at City Index, says:“The FTSE 100 edged higher to close in on last week’s record, as the pound weakened following the release of UK wages and Jobs data that puts a March rate cut firmly on the table, barring any surprises in tomorrow’s inflation report.

Unless we see a sharp turnaround in data, I would be expecting another rate cut in June, and possibly more in the summer if inflation risks ease.This should keep the longer term FTSE 100 forecast firmly supported and keep a lid on sterling.Shein has responded to the EU’s investigation, saying in a statement it took its obligations under the DSA “seriously”.Shein says it has always cooperated fully with the European Commission and Coimisiún na Meán [the Irish regulator which will lead the investigation] and would “continue to” do so.It added it had taken steps to limit harms, saying:“Over the last few months, we have continued to invest significantly in measures to strengthen our compliance with the DSA.

These include comprehensive systemic-risk assessments and mitigation frameworks, enhanced protections for younger users, and ongoing work to design our services in ways that promote a safe and trusted user experience.”The cost to borrow on a UK credit card has hit its highest level in at least 20 years, data provider MoneyFacts reports.MoneyFacts data shows that the the average credit card purchase APR [annual percentage rate] hit 35.8% in February, the highest rate since records began in June 2006.Rachel Springall, Finance Expert at Moneyfactscompare.

co,uk, says:“The latest statistics from UK Finance reveal around half of credit card holders are now incurring interest charges, and while some might only owe a few hundred pounds, there will be others with significantly more debt that needs to be paid back,Luckily, there are some lengthy interest-free balance transfer cards to choose from, with TSB leading the market with a 38-month term, which charges a transfer fee of 3,49%,Reviewing card statements regularly is vital to stay on top of debts, but it’s also wise to make a calendar note of when any balances will incur interest.

Shifting debts around is handy to grab interest-free offers, but the debt will hang overhead if only the minimum repayments are made each month.“Not every borrower will have the best credit score, which is why it’s wise to check a credit report often before applying for a new card, and sort out any discrepancies.Those who get turned down will need to prioritise paying their debts as quickly as possible.Making fixed credit card payments is the fastest way to clear debts, those using a credit card charging 35.8% APR with a debt of £500 would take an entire year to pay it off based on a fixed repayment of £50, and it would cost £85 in interest.

Increasing this payment to £100 per month would clear the debt in six months, and halve the interest charged (£42),Newsflash: The EU is to open a formal investigation into the Chinese retailer Shein over multiple suspected breaches of European laws including the sale of childlike sex dolls and weapons,The European Commission said on Tuesday it had launched the inquiry after demanding information from the fast-growing company last year,A senior EU official also pointed to reports of clothes, cosmetics, electronic products that were not compliant with EU law,The investigation will examine three areas of Shein’s service that have given cause for concern.

Apart from the sale of illegal products, it will also look at the “addictive design of the service Shein is providing”, an EU official said, including bonus points programmes, gamification and rewards “that may lead to a risk of users’ mental well being”.More here.Smaller Christmas bonuses helped to depress pay growth in the last quarter of 2025, reports Andrew Wishart, senior UK economist at Berenberg bank.He told clients:“Employers play Scrooge: As companies no longer need to offer generous compensation to retain staff, they paid smaller Christmas bonuses than a year earlier.As a result, total pay growth slowed from 4.

6% yoy in the three months to November to 4.2% 3m yoy in December (consensus 4.6%).A sharper deceleration in pay growth than inflation cut real pay growth from 1.1% 3m yoy in November to 0.

8% 3m yoy in December, its lowest since mid-2023,Alongside an increasing personal tax burden, we expect this to subdue consumer spending growth in the near term,”And with slack increasing in the labour market, Wishart sees more chance of a cut to UK interest rates next week:“Soft UK labour market data for December and January increase the chance that the Bank of England (BoE) will cut interest rates on 19 March already instead of waiting until the end of April as we forecast,The tick up in the unemployment rate from 5,1% to 5.

2%, another drop in payroll employment and still-elevated redundancies illustrate that the labour market continues to loosen.Crucially, this fed through to a slowdown in pay growth - a critical variable for many Monetary Policy Committee (MPC) members looking for reassurance that labour market slack is causing wage inflation to ease.”The UK’s youth unemployment crisis is worse than during the Covid-19 pandemic.The jobless rate for 16-24 year olds has risen to 16.1%, over the peak recorded in 2020, and the highest since the end of 2014.

Barry Fletcher, chief executive at Youth Futures Foundation, flags that Britain’s youth jobless rate is now above the European average:“The Office for National Statistics’ latest labour market data has been released today, showing that unemployment continues to increase at a rapid pace.Around 1 in 7 (14.1%) young people not in full-time education are now unemployed – up from 1 in 10 (10.0%) four years ago, when the UK was emerging from the pandemic.That means an estimated 469,000 16–24-year-olds not in full-time education are out of work and actively looking for a job.

Over the past year, unemployment among young people has risen, while economic inactivity — those not in work and not actively looking — has fallen,”“In the last few days, the OECD has highlighted that Britain’s youth unemployment rate has risen above the European average for the first time since records began in 2000,This not only demonstrates the scale of the issue we face, but that young people continue to bear the brunt of this labour market downturn,”While we have recently seen much needed Government focus and investment to support more young people into work through employment support and apprenticeship reform, more will be needed to meaningfully tackle the youth employment challenge,“As our Youth Employment 2025 Outlook reveals, the prize of sustainably addressing the UK’s stubborn employment challenge for our young people and the economy is enormous.

If the UK matched the Netherlands’ youth participation rate, approximately 567,000 more young people would be in work or education, boosting the long-term economy by £86 billion.”Britain’s weakening jobs market means the Bank of England will have to cut interest rates three times this year, predicts Tomasz Wieladek, chief European macro economist at asset management firm T.Rowe Price.Today’s labour market data broadly confirms the MPC’s [monetary policy committee’s] recent dovish pivot.The unemployment rate rose to 5.

2%, relative to expectations of 5.1%, while employment growth in the three months to December was 52k, below expectations of 108k.Payroll employment growth surprised to the upside, but remained in negative territory.All metrics indicate that the labour market continues to shed jobs.Wage growth is weakening and is now within a range consistent with achieving the inflation target.

At its last meeting, the MPC chose to put additional emphasis on labour market data in future monetary policy decisions,The data today show that the labour market is weakening slightly faster than expected,This is a result of both a jobless recovery due to the introduction of AI in the UK’s services-based economy and the fact that monetary policy is likely too tight to deliver the inflation target,The MPC will continue to react to these data developments,I believe the MPC will cut at least three times this year.

Financial markets still have to price this scenario.Sterling could weaken significantly against the US dollar again, and front-end gilts should rally from current levels.Disappointingly, UK labour productivity deteriorated in the last three months of 2025.The Office for National Statistics has estimated that output per hour worked in Quarter 4 2025 was 0.5% lower compared with Quarter 4 2024, while output per worker decreased by 0.

2% compared with the same period,The ONS says:The information and communication industry made the biggest positive contribution to productivity growth, compared with the 2019 average; this was caused by a larger increase in gross value added (GVA) compared with hours worked,Financial and insurance activities made the biggest negative contribution to productivity growth, compared with the 2019 average; this was caused by a small increase in the number of hours worked, alongside a more significant fall in output,Another worrying development: the number of English and Welsh companies falling into insolvency rose by 4% in January, getting the new year off to a bad start,HMRC data shows there were 1,744 registered company insolvencies in England and Wales last month, up from 1,683 in December.

On an annual basis, though, it’s 14% lower than in January 2025 (when there were 2,028 insolvencies).HMRC reports:Company insolvencies in January 2026 consisted of 256 compulsory liquidations, 1,323 creditors’ voluntary liquidations (CVLs), 151 administrations and 13 company voluntary arrangements (CVAs).There was one receivership appointmentThe UK’s youth unemployment rate hasn’t been higher in a decade.The 14% jobless rate recorded in October-December 2025 among the UK’s 18-24 year olds was last seen in July-September 2020, when Covid-19 lockdowns hit demand for workers.To get a higher rate than 14%, you need to go back to April-June 2015 when it was 14