UK Data Preview: Back to Counting Days & Barrels

Research evidence excerpt

UK Data Preview: Back to Counting Days & Barrels

IdeaMLabour market: In this note, we dig into two interesting labour market data points

from recent weeks: the LFS-measured surge in self-employment and the sharp

uptick in redundancies in May. The latter data has started to normalise into the end

of June, but we assume it will translate to weak payrolls across June, July and

August. We see some scope for this broad-based uptick in redundancy intentions to

have been linked to the Employment Rights Bill, but we are not fully convinced.

Self-employment-wise, using HMRC data, we show that the surge in 1Q might just

be reflecting somewhat better self-employment trends over the post-Covid years

than the LFS had initially estimated. As was the case with the employees data in

2024 and 2025, as the quality of the LFS is improving, the survey is "finding"

workers who had been employed for a while, classifying them as newly employed.

The totality of the labour market evidence suggests weak hiring appetite and a

jobless rate that is likely ~5%. But we have no certainty on what the size of the UK

labour force or the broader economy actually is. Needless to say, this is a crucial

input into assessing the size of the tax base and the scale of the output gap.

Pay growth | More of the same: We expect private sector ex-bonus pay growth to

round up to 2.9%3M/Y, with balanced risks around out forecast. With AWE data

seemingly down-weighted by the MPC and the BoE due to compositional effects, we

see asymmetric risks related to these figures. In case of further misses, the market

might shrug the numbers off. But, even if a more robust headline print is a result of

a reversal in compositional effects, we worry about an outsized reaction from the