ALEX BRUMMER: Bank of England has a green light for rate rises

There is nothing in the latest jobs data to give the Bank of England cause to hold back on raising interest rates tomorrow.

The Bank’s hesitation last year, in the face of ‘transitory’ price increases, was based on fear of a jump in unemployment when furlough ended. The reality is that Britain’s labour market is as tight as a drum.

A popular view that a buoyant jobs market and surging vacancies are the result of an exodus of 600,000 or more EU workers because of Covid and Brexit is threadbare.

The internationally recognised jobless rate for the three months to January is down to 3.9 per cent of the workforce, or at pre-pandemic levels.

The number of people on payrolls jumped by a further 275,000 in February, which is the biggest rise recorded since HMRC started supplying the date in 2014. And vacancies rose to a new record high of 1.3m in the same month.

Anyone concerned that opening Britain’s borders to tens of thousands of refugees fleeing Ukraine might mean less employment for Brits already here, Afghan refugees still being processed and British national passport holders arriving from Hong Kong, should find the vacancy data hugely reassuring.

Those who oppose opening the floodgates to Ukrainians fear pressure on health services and housing.

However, a younger cohort of immigrants could contribute to higher productivity and their national insurance and income tax payments will help to fund public services.

One only has to look at the contribution that strong employment made to the public finances, as the economy emerged from Covid, to recognise the benefits of a larger working population rather than the ‘great resignation’ affecting American recovery.

Many employers, who are facing critical labour shortages, are accepting that colleagues shouldn’t be punished by cost of living shocks. 

Average weekly earnings climbed by 4.8 per cent in the three months to January, easing some of the pain from ballooning consumer price inflation.

There can be no complacency about output or jobs prospects in spite of tight labour supply. The war on Ukraine is denting consumer confidence across the eurozone.

Even though parts of the EU are more geographically exposed than Britain, there is no reason to think that the UK can defy events on the continent.

Further afield, in China, Omicron is leading to new lockdowns from Shenzhen, on the borders of Hong Kong, to Beijing itself.

Should the Bank of England and the Federal Reserve, which have interest rate decisions to make this week, hold off on hikes?

Almost certainly not. Inflation is rampant, energy costs out of control and the last thing the world needs is for higher prices to become embedded in the psyche.

Official interest rates are still remarkably low at 0.5 per cent in the UK and zero to 0.25 per cent in the US. So even if rates rise they could hardly be considered penal.

There will be distorting effects such as a rise in HM Treasury’s bill for servicing government debt which we will hear more of in Rishi Sunak’s March 23 budget. 

That’s a problem for the Chancellor, not the interest rate-setting Monetary Policy Committee.

Polish promise

A dozen years have passed since Ocado went public and investors have bought into the growth story.

In its latest international foray, the UK’s grocery pioneer is diving into Poland.

It has formed a partnership with Auchan to help the Polish retailer develop its online grocery and non-food sales, and will start with a site in Warsaw.

Ocado is promising long-term value generation. But with heavy capital expenditures upfront, one couldn’t blame investors for getting impatient.

That was also the case with Amazon which took 14 years to move into the black.

Too soon then to give up hope.

HSBC hubris

Britain’s most profitable bank HSBC (it earned £14billion in 2021) is hardly helping the levelling up agenda by closing another 69 UK branches after shutting 82 in 2021.

Central London closures are tolerable but axing outlets in places like Hartlepool, Monmouth, Omagh and St Annes is cruel.

It is calamitous for pensioners, inconvenient for local enterprises and frustrating in those parts of Britain where fibre-to-the-door internet is a dream. Chief executive Noel Quinn must think again.