BUSNESS LIVE: Wage growth slows; BT slashes pension deficit; Vodafone profits slump

Thomas Pugh, economist at RSM UK:

‘The slowdown in wage growth in September, from 8.2 percent to 7.9 percent, helps justify the MPC’s decision to keep interest rates at 5.25 percent, but it is still far too high for the MPC to declare that his work is done.

‘Indeed, private sector wage growth excluding bonuses, the measure that most closely reflects underlying wage pressures, slowed from 8.1 to 7.9 percent. Just as important for households, real wages rose 1.4 percent, the fastest pace since March 2022.

That, combined with a large increase in government support for low-income households, should provide a small boost to consumer spending in the fourth quarter and prevent the economy from sliding into recession at the end of the year.

‘Meanwhile, the experimental labor market data produced by the ONS until the new labor force survey is ready showed the unemployment rate remained at 4.2%. But vacancies fell for the 16th month in a row and applications for unemployment benefits rose by almost 18,000, indicating that the labor market is slowly easing further.

‘However, employment has hardly risen, suggesting that the number of people working in Britain is still below pre-pandemic levels, in contrast to the eurozone where employment has risen by almost 3%, and in the US where it is almost 2%. higher. That is a major reason for Britain’s underperformance.

“Overall, the easing in the labor market appears to be slowly feeding through to easing pressure on wages, which should convince the MPC that it just needs to be patient to see wage growth and inflation return to a more normal level, instead of resuming. interest rate increases.’

British interest rates will be cut as early as May and fall to 4.25 percent by the end of next year, Morgan Stanley analysts predict.

The Wall Street bank’s forecast points to a faster set of cuts than predicted by the broader market — and could mean relief for millions of struggling borrowers.

Divisions have emerged at the Bank of England over when the first rate cut should come.

Huw Pill, the Bank’s chief economist, said last week that it “doesn’t seem entirely unreasonable” to expect this to happen in August next year.

Vodafone saw operating profit fall 44.2 percent to €1.7 billion (£1.5 billion) in the first half, due to business disposals, ‘adverse’ currency movements and weaker performance from its associates and joint ventures. .

But the telecom giant reported an acceleration in services revenue in the second quarter after Germany, its biggest market, returned to growth.

Vodafone, which in the past six months announced the sale of its Spanish operations and the merger of its UK division with Hutchison’s Three, reiterated its expectation that full-year adjusted profits will be broadly flat at around £12 billion.

Chief Executive Margherita Della Valle said Vodafone delivered improved revenue growth in almost all its markets in the first half of the financial year.

“Our focus on customers and simplifying our business is starting to pay off, although much more remains to be done,” she said.

BT Group has valued its pension funding gap at £3.7 billion, down from £8 billion in 2020, and the telecoms company has said annual contributions will remain unchanged.

BT will pay £600 million into one of the country’s largest pension schemes every financial year until 2030, plus £180 million under an asset-backed financing scheme.

Otto Thoresen, chairman of the BT Pension Scheme, said it is on track to be fully funded by 2030, thanks to a framework agreed in 2020.

“The BTPS remains on track to meet its obligations to members despite high levels of macroeconomic volatility and uncertainty,” he said in a statement.

“Our deficit is declining, funding levels have improved and we remain on track to be fully funded by 2030.”

After a fantastic six months, Heathrow Airport has become the fourth busiest airport in the world.

Around 7 million passengers traveled through West London airport last month. This was 19 percent more than in October 2022, when 5.9 million people flew through the airport.

British wage growth slowed to 7.7 percent in the three months to September, giving new impetus to the Bank of England’s fight against inflation.

Data from the Office for National Statistics shows that wage growth in the third quarter was in line with forecasts, falling from 7.9 percent in the previous three months, when the pace was the fastest since data collection began in 2001 .

Separate data shows the labor market remained largely unchanged this quarter.