BUSINESS LIVE: Wage growth accelerates; Britvic takeover approved; Capita to cut more staff

Businesses are cutting jobs at the fastest pace in almost four years as Labour’s “gloomy rhetoric and policies” take their toll.

The closely watched Purchasing Managers’ Index (PMI) report showed the steepest fall in private sector headcount since January 2021, when Britain was still in the grip of Covid lockdowns.

James Smith, Developed Markets Economist, UK, at ING:

‘The latest UK jobs report provides further justification, if any were needed, for the Bank of England to leave rates unchanged at its meeting this week.

‘Wage growth rose more than expected according to the latest data, which covers the three months to October. That’s entirely thanks to the private sector, which saw regular wage increases of 12% year-over-year. This is important to the Bank because wage developments in the private sector tend to be more reflective of the broader labor market situation than in the public sector.

Admittedly, these numbers can be volatile and it is difficult to pinpoint an obvious reason for the latest increase. But it will increase suspicion among BoE hawks that wage growth will not easily return to pre-Covid levels. They can also point to the Bank’s own ‘Decision Maker Panel’ survey of CFOs, which shows wage growth expectations bottoming out at around 4%, despite broader signals that the labor market is cooling.”

The proposed sale of Royal Mail to a foreign billionaire for £3.6 billion will result in a windfall for some investors – but others will lose out if the deal goes through.

Czech tycoon Daniel Kretinsky has received permission from ministers to buy the postal service’s parent company International Distribution Services (IDS) for 370 cents per share.

Outsourcing giant Capita has increased its cost savings target from £160 million to £250 million, with the group’s AI effort leading to more job losses.

The London-listed company, which employs about 41,000 people worldwide, said it is increasing its use of artificial intelligence, which has helped it further reduce costs.

Capita said a voluntary employee turnover rate (i.e. when staff choose to leave the company) of around 21 percent will contribute to the savings target and reduce the need for redundancies.

Capita also revealed it expected to take a £20m annual hit from the rise in National Employer Insurance next year.

A Greek industrial conglomerate worth £4 billion has confirmed plans to pursue a primary listing in London as a new boost for the city.

Athens-listed Metlen Energy & Metals said yesterday it has filed paperwork with the watchdog, the Financial Conduct Authority (FCA).

It is the first step in a regulatory process that will see the companies list on the stock exchange in London by 2025, the company said.

Thomas Pugh, economist at RSM UK:

‘The jump in wage growth excluding bonuses to 5.2% is another nail in the coffin of an interest rate cut on Thursday. Moreover, there was little sign of companies reducing workforces ahead of the budget. Our base case is that the MPC will cut rates once a quarter next year, but strong wage growth and a second Trump presidency increase the risk of fewer rate cuts.

‘There was little evidence that pre-Budget concerns caused companies to radically change their employment plans. Employment rose by 173,000 in the three months to October and the unemployment rate remained at 4.3%. Granted, employment statistics are currently unreliable, so the jump may be due to data revisions rather than a real increase. It may also be that most of the impact on the labor market will only occur after the budget. The number of employees on payroll did indeed fall by 35,000 in November, but this metric is extremely volatile and we don’t have much confidence in one-month figures, so this is one to keep an eye on.

‘However, the wage growth figures are more reliable and will make the MPC nervous. With ex-bonus wage growth in the private sector rising to 5.4%, there is a good chance that wage growth in the fourth quarter will be slightly faster than the 5.1% estimated by the MPC. This gives the MPC a good reason to keep the interest rate at 4.75. % on Thursday and will make the country even more cautious in cutting interest rates next year.”

Britain’s competition regulator has cleared Carlsberg’s takeover of soft drinks maker Britvic, saying the £3.2 billion transaction will not be referred for an in-depth investigation.

Carlsberg struck a deal in July to acquire the British soft drinks maker, with the aim of creating a British ‘drinks powerhouse’.

The deal, which is expected to close on January 16, will see the Danish brewer take over Britvic’s bottling agreement with PepsiCo. Carlsberg already bottles PepsiCo drinks in several markets and sees opportunities to expand into other regions in the future.

Carlsberg and Britvic said in a separate joint statement that all regulatory conditions have been met, including approvals from the European Commission and the UK Competition and Markets Authority.

British wages rose by 5.2 percent more than expected in the three months to October, new data from the Office for National Statistics shows.

The figures, which beat forecasts of 5 percent growth in average weekly earnings before bonuses, could further weigh on expectations about the pace and size of the Bank of England’s interest rate cuts.