Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

Labour Risks Higher Mortgage Bills and Worse Unemployment, Warns HSBC

by June 18, 2024
June 18, 2024
Labour Risks Higher Mortgage Bills and Worse Unemployment, Warns HSBC

Labour’s proposal to introduce a “genuine living wage” could lead to higher unemployment and increased mortgage costs, economists at HSBC have warned.

Sir Keir Starmer’s party has pledged to bring in a ‘New Deal for Working People’ within its first 100 days if elected, which includes replacing the minimum wage with a living wage reflecting the cost of living.

HSBC economists Elizabeth Martins and Emma Wilks cautioned that raising the minimum wage significantly could increase business costs, reduce efficiency, and potentially lead to job cuts. “A higher minimum wage could increase costs and reduce efficiency, adding to unit labour costs. This in turn could either push firms into reducing headcount and/or sustain lingering inflation pressures, keeping the Bank Rate higher for longer,” they noted.

The minimum wage rose by a record amount in April, from £10.42 to £11.44, with employers’ average wage bills growing by 20% over the past two years. Labour’s plan would further elevate these costs, exacerbating concerns about inflation, which the Bank of England is closely monitoring. The Bank’s current base rate stands at 5.25%, and there is reluctance to reduce it until inflation is firmly under control.

HSBC highlighted that high wage growth is currently fueling inflation in the UK, particularly in the services sector, which has proven stubborn. “High wage growth is fuelling inflation in the UK at the moment,” the economists said, adding that services inflation is not “fully tamed.”

The Bank of England’s rate-setters are hesitant to cut interest rates from their 16-year high until they see a clear reduction in inflation. Markets are only fully pricing in one rate cut from the Bank this year after inflation and wage growth fell slower than expected in recent months.

In addition to inflation concerns, Labour’s plan could also impact public investment. The Institute for Public Policy Research (IPPR) warned that inherited spending plans from the Conservatives could offset Labour’s proposed investment of £4.7 billion per year in green energy projects, leading to real-term funding cuts for many public services.

The IPPR also noted that Labour might need to implement significant spending cuts or raise taxes unless the economy grows faster than expected. “Realistically, it is possible that Labour might have to raise taxation,” Martins and Wilks observed.

Despite these warnings, HSBC acknowledged potential positive outcomes. If successful, Labour’s wage proposal could boost employment and productivity by increasing worker motivation and encouraging more people to enter the workforce. This could help alleviate the UK’s current employment issues, particularly the high rates of long-term sickness keeping people out of work.

However, the economists tempered their optimism, suggesting that the best-case scenario might be overly hopeful. They also pointed out that some labour market improvements expected from Labour have already been partially implemented by the Conservative government.

Adding to the economic challenges, the UK has experienced the lowest level of investment among G7 economies for the third consecutive year in 2022. The IPPR reported that the UK has lost £1.9 trillion in investment over the past 32 years compared to the average G7 investment rate since 1990. George Dibb, associate director for economic policy at IPPR, emphasized the need for new investment to improve the UK’s economic performance.

As Labour outlines its ambitious plans for economic reform, the potential impacts on inflation, employment, and investment will be closely scrutinized by both economists and the public.

Read more:
Labour Risks Higher Mortgage Bills and Worse Unemployment, Warns HSBC

0
FacebookTwitterGoogle +Pinterest
previous post
Chinese House Prices Plunge at Fastest Rate in a Decade
next post
London’s Productivity Decline Linked to Remote Work, Reports ONS

You may also like

HSBC UK launches £250m growth fund to empower...

September 13, 2024

Barriers faced by disabled entrepreneurs cost UK economy...

May 12, 2025

Manchester chicken shop boss loses £12,000 in Tesla...

February 8, 2024

Women required to provide more evidence of their...

April 4, 2023

‘Greenwashing’ firms face steep new UK fines for...

February 20, 2023

Why You Can’t Afford to Ignore Hyperpersonalisation in...

April 1, 2025

Northumberland gigafactory plans suffers setback as Britishvolt owner’s...

June 25, 2023

How Centrepoint can help rural England’s young rough...

November 4, 2022

Labour’s VAT on private school fees set to...

January 3, 2025

Lloyds Bank orders staff to return to the...

April 28, 2023

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump ally stands firm against ‘big, beautiful bill’ despite pressure: ‘It’ll completely backfire’

      June 8, 2025
    • Rubio condemns assassination attempt on Colombian presidential candidate Miguel Uribe

      June 8, 2025
    • Obama WH physician says Biden doc should have performed cognitive test

      June 8, 2025
    • Trump warns of ‘serious consequences’ if Elon Musk funds Democrats

      June 7, 2025
    • Musk jokes about reconsidering stance on Big Beautiful Bill after Schiff’s praise

      June 7, 2025
    • Musk deletes explosive posts about Trump and Epstein files

      June 7, 2025

    Categories

    • Business (8,152)
    • Investing (2,019)
    • Politics (15,571)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved