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UK state pension on track to rise 4% under triple lock; grocery inflation falls – business live
By Graeme Wearden,
4 hours ago
Latest earnings data will set the level of the UK’s triple-lock pensions next year Photograph: Dominic Lipinski/PA
10.50am BST
GB News investor Paul Marshall seals £100m deal to buy Spectator
In the media world, Sir Paul Marshall has sealed a £100m takeover of the Spectator magazine.
The move means the backer of GB News completes the next stage of his ambition to control a significant swathe of the UK’s conservative and rightwing media outlets.
Today’s labour market report shows a clear slowdown in nominal wage growth in the last year, even as real wages recovered (thanks to falling inflation).
Total nominal pay in May-July 2023 grew by 8.3%, more than twice as fast as the 4.0% recorded this morning.
Recruitment and Employment Confederation (REC) chief executive Neil Carberry, says there is a clear slowdown in pay growth:
“The slowdown in pay is quite clear now, despite the effects of awards in the public sector this summer. This should give confidence to the Bank [of England] on the future path for interest rates. Lower cost of capital could also drive confidence in business to invest.
10.17am BST
Goldman: Reeves to raise taxes by at least £15-20bn per year
Goldman Sachs have predicted that Rachel Reeves could hike taxes by up to £20bn per year in next month’s budget.
In a new research note this morning, Goldman analyst James Moberly explains that the Labour government faces “a challenging fiscal outlook”. That, he says, is because the UK faces “significant in-year spending pressures” in the current financial year, and because planned spending growth in future years “looks too low”.
This indicates that spending may need to be around £25bn a year higher than budgeted for in Labour’s manifesto by the end of the Parliament, Moberly has calculated.
And that, he tells Goldman’s clients today, means increases in taxation are also likely to be required – worth “at least” £15-20bn per year.
Moberly explains:
Given that the Chancellor is likely to want to leave a somewhat larger margin of headroom than the Conservatives did in recent fiscal events, we expect that the government will aim to raise at least £15-20bn per year in additional receipts on top of the tax increases announced in the manifesto.
Moberly adds that the government could benefit if the Bank of England slows the pace of its bond sale programme (quantitative tightening, or QT) this month. Lower losses from QT could free up billions of pounds of fiscal space against the debt target.
Alternatively, Reeves could reduce the effect of the losses on the public finances by around £15bn by changing the debt rule to target headline rather than underlying net debt, he suggests.
9.51am BST
Former pensions minister Sir Steve Webb , who is now a partner at pension consultants LCP (Lane Clark & Peacock), has calculated that pensioners who lose their winter fuel payments still be worse off once the state pension rises in April, once you account for inflation.
Webb explains:
“Part of next April’s increase is simply to keep pace with rising prices.
“Based on the current inflation figure of 2.2%, the new state pension would need to rise by just over £250 simply for pensioners to stand still.
“Whilst an above-inflation increase of £460 will be welcomed, only the further £210 represents a real increase.
“And this is before allowing for the income tax which most pensioners will pay on their state pension rise.
“Those who lose £200 or £300 in winter fuel payments will therefore still be worse off in real terms next April.”
9.38am BST
There’s little chance that inflation will surge this month, pushing the increase in the state pension above the 4% now firmly pencilled in.
Under the triple lock, the state pension should rise by the higher of total wage increases in May-July, inflation (in September), or 2.5%.
Ellie Henderson , economist at Investec, predicts inflation will actually drop below the Bank of England’s 2% target this month ( it was 2.2% in July ). That would mean that today’s wages data would be used to set pensions next April.
Henderson says:
The government is likely to be paying closer attention to these wage numbers than usual, given the implications on the public purse through the ‘triple lock’ on pensions.
This is a guarantee by the government that the state pension will rise by the highest of wage growth in the three months to July, CPI inflation in September, or 2.5%. Considering that we forecast inflation at 1.6% in September, it is highly likely that at 4.0%, wage growth will be the highest of the three.
If correct, and assuming no revisions, this will result in the new full 2025/26 state pension rising by £460 per year.
9.16am BST
Apple and Google lose EU court fights
Just in: The European Commission has won two big legal fights against US Big Tech firms this morning.
Apple’s attempt to avoid paying €13bn in back taxes has also been dismissed.
The EU’s Court of Justice in Luxembourg has backed a landmark 2016 decision that Ireland broke state-aid law by giving the tech giant an unfair advantage.
Back in 2020, the European general court annulled that decision – but today, the European Court of Justice has ruled that the original decision was correct.
This judgement is likely to have far-reaching effects on “sweetheart” deals for large multinationals.
Jefferies economist Modupe Adegbembo predicts the Bank of England will resust cutting interest rates again until November, especially following the rise in people finding work in May-July.
Adegbembo explains:
This month’s labour market data showed that wages continue to ease, but at the same time employment jumped by 265k — the largest increase in over two years. We think the reliability issues with the Labour Force Survey (LFS) mean the Bank of England (BOE) will not place much weight on the bounce in employment, but it should kill any lingering expectations of a September rate cut.
We continue to expect the BOE to cut next in November by 25bp, but the labour market showing signs of tightening whilst growth is rebounding makes it very hard to see the BOE delivering anything faster than quarterly cuts, even though some on the Monetary Policy Committee (MPC) may want to.
8.46am BST
Falling inflation means that UK workers still received a welcome real-terms income boost this summer, even though wage growth slowed.
So says Louise Murphy, senior economist at the Resolution Foundation:
“While wage growth continues to weaken, even faster falling inflation over the summer means that workers have enjoyed long overdue real-terms pay rises of 2.2%. This is the kind of healthy wage growth we took for granted before the financial crisis, but haven’t seen since.
“Workers’ income boosting pay rises this summer will also deliver an income boost for pensioners next Spring, as they will drive a £460 increase in the State Pension via the Triple Lock.
“But unless we see a marked increase in productivity, this honeymoon period of real wage growth is unlikely to last for long.”
8.41am BST
Youth unemployment hits three-year high
Youth unemployment across the UK has hit its highest level in over three years, in a sign that young people are struggling to enter the labour market.
Today’s jobs data shows that the unemployment rate among 18-24 year olds jumped to 13.3% in May-July, up from 12% in April-June, on a seasonally-adjusted basis.
That’s the highest reading since December-February 2021.
The increase suggests that as the academic year ended, some students were unable to find work.
TUC general secretary Paul Nowak says:
“Working people are still facing major problems left behind by the Conservatives.
“Vacancies have been falling for more than two years. Millions of workers are in insecure jobs and without proper employment rights. And young people’s futures are on the line as youth unemployment rises.
“Most employers support the new government’s plans to make work pay and strengthen workers’ rights. It’s time to move on from the low-pay, low-rights approach that has failed so many people so badly.”
8.17am BST
Grocery inflation falls to 1.7%
Good news for shoppers – grocery inflation has fallen.
Data provider Kantar reports that annual grocery price inflation was 1.7% in the four weeks to 1 September, down from 1.8% last month .
That will ease some of the pressure on household budgets – but even so, Kantar also flags that nearly 60% of UK households are worried about the rising cost of their shopping
Fraser McKevitt , the researcher’s head of retail and consumer insight, says:
“This is their second biggest financial worry, only behind home energy bills.”
Kantar reports that prices are fastest for vitamin and mineral supplements, chilled fruit juices and chocolate confectionery.
But toilet tissue, dog food and bottled cola drinks are among the items whose price is falling.
Kantar also reports that online supermarket Ocado was again the fastest growing grocer with sales up 12.9% year-on-year in the last monthr.
Tesco’s sales rose by 5.3%, while Sainsbury’s grew 5.7%.
We also have a slowdown in real wage growth – or how fast pay packets increased after inflation.
Using CPI real earnings, regular real pay (excluding bonuses) rose by 3.0% on the year, lower than the previous three-month period when it was 3.2%, the Office for National Statistics reports.
Total real pay (including bonuses) rose by 1.9% on the year in May to July 2024.
7.58am BST
Analyst: Pensioners won't feel richer
While the government may be handing pensioners an increase in the state pension with one hand, it is taking away the winter fuel allowance from around nine million pensioners with the other.
That controversial decision to means-test the winter fuel payment means only poorer old people – who get pension credit – will still receive it.
So much of the increase in the state pension will be eaten away by that move, and by rising prices in the shops.
Myron Jobson, senior personal finance analyst at interactive investor , explains:
“It is all but confirmed that the state pension will rise in line with average earnings, as the headline inflation figure for September is not expected to come in higher.
“While the £460 increase in the state pension may seem like a welcome boost on the surface, many pensioners won’t feel any richer thanks to the double whammy of inflation, which continues to erode the real value of any pension increment, and the loss of the £300 Winter Fuel Payment, which is now means-tested.
“Our calculations offer a stark reminder that while the state pension is a vital component of retirement income, it falls short of covering even the minimum income needed to enjoy a comfortable retirement. Worryingly, our research has exposed a looming national pension emergency, with people at the crunch stage of their retirement planning not saving enough into their pensions to secure a comfortable living standard in retirement.
7.50am BST
Monica George Michail, NIESR Associate Economist, has spotted that wage growth in the services sector slowed in the quarter.
Today’s ONS figures indicate that wage growth continues to ease, recording 5.1 per cent in the three months to July (4.0 per cent including bonuses).
Most notably, services sector pay growth has fallen faster than expected, recording 3.8 per cent, compared to an average of 5.9 per cent in the first five months of this year. This is positive news for inflation and might provide the Bank of England with increased confidence regarding interest rate cuts”.
However, a cut might not come as soon as the BoE’s next meeting, in two week’s time.
The City money markets indicate there’s a 78% chance that the Bank leaves interest rates on hold, at 5%, and only a 22% prospect of a cut to 4.75%.
7.45am BST
Vacancies also continue to fall.
Today’s labour market report estimates that the number of vacancies in the UK decreased by 42,000 in June to August, to 857,000.
That’s the 26th quarterly fall in a row – but there are still more vacancies across the economy than before the Covid-19 pandemic:
7.41am BST
UK payrolls dip in July and August
The number of workers on payrolls fell in the last two months – a sign that the jobs market may have cooled a little in July.
The ONS estimates that the number of payrolled employees in the UK decreased by 6,000 between June and July 2024.
But on an annual basis, payrolls were 203,000 higher than in July 2023 .
And in August, the ONS’s early estimate is that payrolled employees decreased by 59,000 month-on-month.
7.36am BST
Economic inactitvity dips, but still a problem
The number of people classed as economically inactive has dropped, but remains near record levels.
There were 9.298m people neither in work nor looking for a job in May-July, a drop of 136,000 in the quarter.
That has pulled the inactivity rate down to 21.9%, from 22.2% last month.
The ONS says:
The quarterly decrease in economic inactivity was mainly caused by those who are inactive because they are students, long-term sick, or retired. These decreases were partially offset by increases in those who are economically inactive because they are discouraged workers (meaning that they are eligible for employment but unemployed and not seeking work) and those inactive for “other” reasons.
Yesterday, Work and Pensions Secretary Liz Kendall held a meeting with labour market experts to discuss how to tackle economic inactivity – which the government calls ‘greatest employment challenge for a generation’.
Yael Selfin, chief economist at KPMG UK, fears the problem will not be solved fast:
“The high level of inactivity is expected to persist in the near term, as the number of long-term sick and the backlog in NHS waiting lists are likely to remain elevated. That could put pressure on the economy if demand recovers unexpectedly strongly.
Updated at 8.00am BST
7.28am BST
UK unemployment rate drops
Today’s UK jobs report also shows that the unemployment rate has fallen to 4.1% for the May to July quarter.
That’s down from 4.2% in April-June.
During the quarter, unemployment fell by 74,000 people to 1.437 million.
And employment rose in the quarter – it’s up by 265,000 to 33.232 million, to 74.8% of the population.
7.21am BST
Jamie Jenkins, Director of Policy at Royal London, says:
“With inflation having reduced, the ‘triple lock’ will return to wage growth as the highest measure, and this should drive a 4% increase to the State Pension from April 2025.
“The government has committed to retaining the triple lock for now, ensuring that the State Pension rises each year by the highest of average wages, inflation or 2.5%.
“Inflation drove an 8.5% increase in April 2024 and, although the 2025 increase will be lower, it still serves to ensure those in receipt of the State Pension get the best of three measures, keeping pace with wages this year, and exceeding inflation at its current level.
“However, recent data obtained by Royal London found that only half of the 3.5 million recipients of the new State Pension were paid the full weekly amount of £203.85 last year, due to gaps in their National Insurance record. Until April 2025, those who are entitled to the new State Pension may be able to fill in the gaps going back to 2006.
7.14am BST
The BBC’s Faisal Islam has also calculated the likely increase in the state pension:
Updated at 7.15am BST
7.13am BST
Basic pay (stripping out bonuses) rose by more than total pay in the last quarter.
The Office for National Statistics reports that average regular earnings (excluding bonuses) in Great Britain grew by 5.1% in May to July.
However, it’s the total pay increase (4%) which is usually used to set the triple lock.
Updated at 7.13am BST
7.06am BST
State pension on track to rise 4% due to wage increases
Newsflash: UK wage growth has slowed… but pensioners on the new state pension should still be guaranteed an increase of around £460 next year.
The latest UK labour market statistics, just released, show that total pay (including bonuses) rose by 4% in the May-July quarter.
And under the UK’s triple-lock pension pledge, that indicates that the new state pension should also rise by 4% next year.
That would lift the new state pension – currently £221.20 per week – up to around £230 per week, an increase of almost £9 a week from next April.
On an annual basis, it would increase the new state pension from £11,502.40 per year to £11,962 per year, an increase of £460 a year.
The final decision on the state pension will be taken by the secretary of state for work and pensions, Liz Kendall, before October’s budget. But chancellor Rachel Reeves has already pledged the government’s backing of the triple lock until the end of this parliament.
Updated at 8.37am BST
6.52am BST
While the pensions triple-lock seems safe under Labour, Jon Greer, head of retirement policy at Quilter, fears that the sustainability of the triple lock in the long term is questionable.
Greer explains:
It remains a contentious issue in pension policy, with no government willing to make drastic changes due to the potential backlash from a core voter base. Given recent changes to winter fuel payments which spurred immediate calls for a rethink due to the number of people who will struggle to pay their bills this winter as a result, any alterations to the triple lock by Labour seem entirely remote and more so given Rachel Reeves’ recent confirmation that it would stick by the policy.
“The debate around the triple lock often intersects with discussions on the appropriate level of the state pension relative to mean full-time earnings. There is a need for a consensus on the state pension level and a fair mechanism to ensure its value is maintained over time. Without such an approach, each uprating of the state pension risks creating generational divides. A system more closely aligned with average earnings might be more cost-effective and better reflect the nation’s overall prosperity.
“While the anticipated uplift in the state pension is positive news for pensioners, it is essential to consider the broader implications and sustainability of the triple lock policy. The government’s pension review will latterly look at pensions adequacy which must consider both state and private provision. Perhaps the review will be the mechanism to start the journey for change that removes the politics from the triple lock.”
6.48am BST
Introduction: UK wage growth to set pensions triple-lock increase
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
We’re about to get a new healthcheck on the UK jobs market, and learn by how much the state pension should increase by next year.
The latest labour market statistics, due at 7am, are expected to show the unemployment rate dropped to 4.1% in May-July, down from 4.2% a month ago.
But wage growth is also expected to have slowed; total pay (including bonuses) is expected to have risen by 4.1% in the quarter, down from 4.5%.
And that will have implications for pensioners.
Under the UK’s triple-lock system, the state pension should rise each year by either inflation (the previous September), average earnings (for May-July), or 2.5%.
Inflation is not expected to rise sharply again this year (it was last clocked at 2.2%), so it’s today’s earnings figures that will be crucial.
The new State Pension is £221.20 a week, or £11,502 per year.
So, if wages did indeed rise by 4.1% in May-July, that would lift the state pension by just over £9 per week to around £230 per week. In annual terms, that’s over £470 more, to £11,973 a year.
“Tomorrow, we get data for earnings growth, which will inform the increase in the pension next year. We are protecting the triple lock, not just for this year, but for the duration of this Parliament.”
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