Youth unemployment remains a concern at around 15%, MHA states.
Emeritus Professor Joe Nellis, Head of Economic Research at MHA, has called on the Chancellor to protect businesses in the upcoming October Budget. He argues this is necessary to prevent further weakening of the jobs market and to avoid discouraging corporate investment. This call comes as UK unemployment remained at 4.9% in the three months to July, with annual growth in regular earnings, excluding bonuses, holding at 3.5%.
Professor Nellis highlighted that the UK labour market continues to struggle, despite an upbeat message from the Chancellor last week suggesting the economy is beginning to ‘turn the corner.’ A particular area of concern is youth unemployment, which remains exceptionally high at around 15%. This figure is more than three times the overall national unemployment rate.
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Decisions made by the Government in recent Budgets have increased business costs, especially employment costs, leading many businesses to become increasingly cautious about expanding recruitment. As a result, the number of job vacancies has fallen substantially over the past year. The hiring of young people has been especially disincentivised, with the increase in the national minimum wage and National Insurance Contributions exacerbating long-standing issues in the labour market, which could lead to a longer-term structural problem.
Additionally, a weakening labour market is expected to result in slower growth in income tax and National Insurance revenues, while potentially increasing the total welfare budget. This leaves the Chancellor with reduced fiscal headroom as he looks to balance the books. For the Bank of England, the moderation of wage inflation over the past year has taken some steam out of domestic inflationary pressures, strengthening the argument that short-term inflation has not yet become structural.
Accountancy and business advisory firm MHA has offices in Edinburgh and Aberdeen among its UK locations.
