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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Brent crude tumbles below $70 per barrel as oversupply fears hit oil price – as it happened

State Pension United States Rachel Reeves United Kingdom
An oil well in Santa Cruz del Norte, Havana.
An oil well in Santa Cruz del Norte, Havana. Photograph: Alejandro Ernesto/EPA

Closing summary

Time for a recap…

Fears of weakening economic demand have hit the oil price today.

UK wage growth slowed in the last quarter, as the labour market softened, with total pay rising 4% per year in May-July.

The data means UK state pensions are likely to rise by 4% next April, if the government sticks with the triple lock.

UK grocery inflation has slowed, with prices rising by 1.7% per year.

German carmaker BMW has cut its 2024 profit margin outlook, citing weak demand in China and problems with a braking system that has led to delivery delays.

Apple has lost a high-profile, €13bn (£11bn) Irish tax battle with Brussels in a decision that will bolster the European Commission’s efforts to clamp down on favourable “sweetheart” tax deals for multinationals.

Sir Paul Marshall has sealed a £100m takeover of the Spectator magazine as the backer of GB News completes the next stage of his ambition to control a significant swathe of the UK’s conservative and rightwing media outlets.

Brent crude has fallen by around a quarter since April, when it was trading around $90 per barrel.

That should have a deflating impact on the cost of living:

Oil company share prices were also on the slide today.

BP’s share price fell 2.2%. today, while Shell lost almost 1.5%.

The slump in the oil price is being spurred by “robust supplies, demand concerns and rampant speculative selling”, says Bloomberg.

They add:

Downbeat economic data from the US and China — including weak import figures released Tuesday — have stirred fears about oil demand in the top two consumers, adding to concerns that a surplus will emerge next year. That’s being compounded by surging output in producing nations outside the Organization of Petroleum Exporting Countries.

“China import-export numbers implied demand destruction in the number one importing country in the world,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA.

US crude oil is also weakening sharply, despite the Gulf of Mexico being threatened by a tropical storm.

US crude has dropped as low as $65.82 per barrel, which looks to be the lowest since May 2023.

There are fears that tropical storm Francine could disrupt US oil production; Exxon and Shell have evacuated some staff from facilities along the Gulf coast, in preparation.

However, the prospect of supply disruption is not lifting the oil price today.

Updated

Brent crude oil falls below $70/barrel

Newsflash: The oil price has tumbled to its lowest level in over two and a half years.

Brent crude, the international benchmark, has sunk below the $70/barrel mark today, its lowest since December 2021.

It’s down 3.2% this afternoon at $69.50 per barrel.

The selloff follows the Opec group’s decision to cut its forecast for oil demand in 2024 and 2025 (see earlier post). Weaker demand is bad for the oil price, leading to fears of a glut of crude.

Fears that the US economy is slowing, and that China’s economic recovery is faltering, have also hit the oil price recently.

Data earlier today showing China’s imports grew more slowly than expected in August have added to concerns that economic demand there is weak.

As PVM Oil analyst Tamas Varga put it:

“The message from China is simple but loud and reverberates throughout the globe.”

Updated

Fed cuts proposed capital requirements for large US banks in half

Speaking of financial stability.…. the US Federal Reserve has cut proposed capital requirements for large US banks by more than half.

The move follows a backlash from the industry and politicians, which has spurred the Fed to rethink how it implements the Basel III international accord that was created after the 2008 financial crisis.

Under its new “re-proposals”, the largest US banks will need to increase their capital by 9%, less than half the 19% originally proposed.

Smaller banks (with assets between $100bn and $250bn) would no longer be subject to the changes, other than recognising unrealized gains and losses of their securities in regulatory capital.

The Fed’s vice chair for supervision, Michael Barr, is announcing the new plan in a speeech at the Brookings Institution, Washington, D.C.

Barr says the plan will result in a “safer and fairer banking system”, saying:

The journey to improve capital requirements since the Global Financial Crisis has been a long one, and Basel III endgame is an important element of this effort. These re-proposals bring us closer to completing the task.

The broad and material changes to both proposals that I’ve outlined today would better balance the benefits and costs of capital in light of comments received, and result in a capital framework that appropriately reflects the risks of bank activities and is tiered to the banking sector. They also bring the proposals broadly in line with what other major jurisdictions are doing.

Updated

BoE's Breeden: We should avoid 'stability of the graveyard'

Bank of England deputy governor Sarah Breeden has warned against creating the “stability of the graveyard” by building too much protection into the financial system.

Breeden, the BoE’s deputy governor for financial stability, has been speaking at the Wharton-IMF Transatlantic Dialogue in Washington DC.

In her speech, Breeden explains that the Bank must ensure that the system provides vital services even as shocks occur, to ensure sustainable economic growth continues.

In doing so, we must avoid the stability of the graveyard, she says, explaining:

To maintain financial stability, we have to mitigate externalities, where market participants don’t consider the impact of their actions on other participants. For example, a lender might have an incentive to lend more because their lending is secured by an asset, not considering that the borrower might have to quickly sell other assets to meet repayments if a shock hits, reducing the prices of assets held by others. Externalities can lead to fire sales, runs on financial institutions, and a worsening of economic shocks.

Of course, one way to bring about financial stability would be to try to build so much resilience in the system that, as a byproduct, very little activity occurs. A previous Chancellor called that outcome the ‘stability of the graveyard’. That wouldn’t be optimal because it would directly limit the provision of services and damage the economy even in the absence of shocks. And so accountability for our actions and considering their costs as well as their benefits are important parts of the statutory regime.

[That previous chancellor, incidentally, was George Osborne]

Breeden also produced this image, showing the Bank’s approach to financial stability:

Updated

The chief executive of NatWest believes the UK economy has reached an “inflection point”, helped by improving customer confidence and stability.

Paul Thwaite is speaking at the Barclays Annual Global Financial Services Conference in New York, and reports that 2024 has been stronger than expected.

Thwaite tells the conference that economic indicators, such as GDP and house prices, over the last eight to ten months have been better than people expected.

NatWest have seen the impact in improved customer sentiment data – although this improvement is from a low base, he points out.

Thwaite says the operating environment is also “encouraging’, citing a recovery in mortgage volumes especially in the last two or three months.

Plus, July’s general election has delivered a “decisive outcome”, Thwaite adds, and one that came earlier than many expected.

If you put the economic, operating and political environment together, it feels like “those dynamics have settled”, Thwaite continues – which is reflected in how its clients and customers feel.

Tomorrow morning we’ll get the first estimate of UK GDP in July, which is expected to show that the economy returned to growth during the month.

Opec trims forecast for global oil demand

Oil cartel Opec has cut its forecast for demand this year, and next year.

In its latest monthly report, Opec has trimmed its estimate of world oil demand growth in 2024 by 80,000 barrels per day, to around two million barrels per days.

The cut reflects “actual data received year-to-date”, Opec says.

The forecast for world oil demand growth in 2025 has been lowered by 40,000 barrels to 1.7 million barrels per day.

Opec lowered its forecast for energy demand despite slightly lifting its forecast for world economic growth this year, to 3%.

James Cockett, senior labour market economist for the CIPD, is concerned that UK youth unemployment has hit a three-year high of 13.3%.

Cockett points out that there are now almost half a million 18-24 year olds unemployed (out of a UK total of over 1.4 million).

Cockett says:

“Whilst overall unemployment levels have fallen, it’s concerning that youth employment has reached its highest level in over three years.

It’s important proposed changes to strengthen employment rights are subject to proper consultation, to ensure they don’t add to the cost or risk employers face in employing staff as this could deter firms from recruiting young people who typically require more development.

Updated

BMW cuts guidance due to braking system problem and weak demand from China

Newsflash: German carmaker BMW has cut its financial guidance for the current financial year, blaming “muted demand in China” and a problem with its braking systems.

BMW says that a problem with an Integrated Braking System (IBS) provided by a supplier has forced it to stop some deliveries, which will have a “negative worldwide sales effect” in the second half of the year.

Over 1.5 million vehicles are affected by the IBS problems, and will lead to additional warranty costs for BMW.

Weak demand from Chinese consumers is also hitting BMW’s sales.

It says:

In parallel to this effect, the ongoing muted demand in China is affecting sales volumes. Despite stimulus measures from the government, consumer sentiment remains weak.

BMW now expects its earnings before tax to “decrease significantly” this year, worse than its previous guidance for a slight fall, with profit margins lower than hoped.

Shares in BMW have dropped by almost 7%.

Students Loans Company warns students to be vigilant of smishing scams

Students have been warned not to fall victim to criminals who use SMS or text messages to entice recipients to click on phoney links.

The Students Loans Company (SLC) says today that scam emails and text messages – known as ‘smishing’ – are currently the most popular form of scam, and are urging students to be vigilant [difficult during the delights of Freshers’ Week…].

Smishing involves students being asked to click a link to complete a task – for example verifying bank details or confirming their personal information. – so that scammers can divert money to their own bank accounts.

Scammers target students at this time of year, the SLC warns, because they receive their first maintenance loan payment.

SLC is expecting to pay £2bn to students over the autumn term. Last year, it says, it stopped £2.9m of maintenance loan payments being taken by smishing and phishing scams, where students received and acted on false communications.

Alan Balanowski, risk director at SLC, advices student who receive a suspicious message should delete it and report it immediately.

Balanowski says:

“Starting or returning to university is an exciting time, but it’s also busy, with students getting organised and set-up for the academic year, which includes dealing with information from different organisations, including ourselves.

We aim to ensure our payment process is simple for students, but we do experience a rise in smishing scams at this time of year. This means students need to be alert to any potential attempt to intercept their maintenance loan instalment.

Updated

Martin Lewis of MoneySavingExpert makes an important point – not all pensioners will get the full state pension, so they’ll receive a smaller rise in April.

Those who are also losing their winter fuel support will face a financial squeeze, he warns:

Lewis explains:

The full state pension rise is for those who get the full state pension. There are up to 800,000 of the poorest pensioners who get less than the full state pension (£11,400 a year) who aren’t claiming pension credit and will miss out on the winter fuel payment even though they should get it.

They are very hard to reach and will be under huge financial pressure. These are therefore people the govt said should be helped but due to difficulties in the system won’t be. These are the people I’m most worried about, some of whom may end up choosing between heating and eating.

"End of an era" in the City as Centamin agrees takeover

There’s a flurry of takever drama in the City this morning, where mining company AngloGold Ashanti has agreed a deal to buy smaller rival Centamin.

Shares in Centamin have jumped 25%, to the top of the FTSE 250 leaderboard, while AngloGold Ashanti are down 6% in premarket trading.

AngloGold has agreed to pay $2.5bn in cash and shares for Centamin, which owns Egypt’s largest gold mine, called Sukari.

The deal means the London stock market will lose another member.

AJ Bell investment director Russ Mould says it’s the “end of an era” of large and medium-sized gold miners on the UK stock market.

“Centamin is one of the last pure-play gold producers remaining on the London Stock Exchange. While there are plenty of tiny exploration companies hoping to strike it rich, few have enjoyed Centamin’s level of success and built a large-scale operating mine.

“Over the years, gold producers of any notable scale have been snapped up by rivals or merged with others, leaving investors with limited options on the London Stock Exchange and effectively making them look at overseas stock markets for a broader range of gold miners.

US small business optimism weakens

Over in the US, optimism among small firms has dropped as bosses fret about inflation.

The Small Business Optimism Index, calculated by the National Federation of Independent Business (NFIB) fell by 2.5 points in August to 91.2.

That wipes out July’s gain, and is the 32nd month in a row below the 50-year average of 98.

NFIB’s Uncertainty Index rose to its highest level since October 2020, with nearly a quarter of business owners saying inflation was their top small business operating issue.

“The mood on Main Street worsened in August, despite last month’s gains,” said NFIB chief economist Bill Dunkelberg, adding:

“Historically high inflation remains the top issue for owners as sales expectations plummet and cost pressures increase. Uncertainty among small business owners continues to rise as expectations for future business conditions worsen.”

Nearly £10bn has been wiped off the value of AstraZeneca after it reported disappointing trial results for a lung cancer drug.

Shares in AstraZeneca, the most valuable company on the London stock market, have dropped by 4.8% this morning.

They fell after detailed results from one of AstraZeneca’s key lung cancer trials released on Monday showed that its experimental precision drug did not significantly improve overall survival results for patients in the trial.

The overall survival, or OS rates, in the TROPION-Lung01 trial “did not reach statistical significance”, the company said in a presentation at the World Conference on Lung Cancer in San Diego.

That’s a blow to hopes that Astra’s Dato-DXd drug would significantly improve survival rates.

Reuters reports:

The late-stage trial has been closely watched by investors and by analysts who forecast that the drug, known as Dato-DXd, could potentially be another best-selling medicine for the company.

The trial compared the two treatments -- AstraZeneca’s drug and chemotherapy -- of patients whose non-small cell lung cancer had returned after one or two prior treatment attempts.

This has knocked AstraZeneca’s value down to £187.6bn, down from £197bn yesterday.

GB News investor Paul Marshall seals £100m deal to buy Spectator

In the media world, Sir Paul Marshall has sealed a £100m takeover of the Spectator magazine.

The move means the backer of GB News completes the next stage of his ambition to control a significant swathe of the UK’s conservative and rightwing media outlets.

Today’s labour market report shows a clear slowdown in nominal wage growth in the last year, even as real wages recovered (thanks to falling inflation).

Total nominal pay in May-July 2023 grew by 8.3%, more than twice as fast as the 4.0% recorded this morning.

Recruitment and Employment Confederation (REC) chief executive Neil Carberry, says there is a clear slowdown in pay growth:

“The slowdown in pay is quite clear now, despite the effects of awards in the public sector this summer. This should give confidence to the Bank [of England] on the future path for interest rates. Lower cost of capital could also drive confidence in business to invest.

Goldman: Reeves to raise taxes by at least £15-20bn per year

Goldman Sachs have predicted that Rachel Reeves could hike taxes by up to £20bn per year in next month’s budget.

In a new research note this morning, Goldman analyst James Moberly explains that the Labour government faces “a challenging fiscal outlook”. That, he says, is because the UK faces “significant in-year spending pressures” in the current financial year, and because planned spending growth in future years “looks too low”.

This indicates that spending may need to be around £25bn a year higher than budgeted for in Labour’s manifesto by the end of the Parliament, Moberly has calculated.

And that, he tells Goldman’s clients today, means increases in taxation are also likely to be required – worth “at least” £15-20bn per year.

Moberly explains:

Given that the Chancellor is likely to want to leave a somewhat larger margin of headroom than the Conservatives did in recent fiscal events, we expect that the government will aim to raise at least £15-20bn per year in additional receipts on top of the tax increases announced in the manifesto.

Moberly adds that the government could benefit if the Bank of England slows the pace of its bond sale programme (quantitative tightening, or QT) this month. Lower losses from QT could free up billions of pounds of fiscal space against the debt target.

Alternatively, Reeves could reduce the effect of the losses on the public finances by around £15bn by changing the debt rule to target headline rather than underlying net debt, he suggests.

Former pensions minister Sir Steve Webb, who is now a partner at pension consultants LCP (Lane Clark & Peacock), has calculated that pensioners who lose their winter fuel payments still be worse off once the state pension rises in April, once you account for inflation.

Webb explains:

“Part of next April’s increase is simply to keep pace with rising prices.

“Based on the current inflation figure of 2.2%, the new state pension would need to rise by just over £250 simply for pensioners to stand still.

“Whilst an above-inflation increase of £460 will be welcomed, only the further £210 represents a real increase.

“And this is before allowing for the income tax which most pensioners will pay on their state pension rise.

“Those who lose £200 or £300 in winter fuel payments will therefore still be worse off in real terms next April.”

There’s little chance that inflation will surge this month, pushing the increase in the state pension above the 4% now firmly pencilled in.

Under the triple lock, the state pension should rise by the higher of total wage increases in May-July, inflation (in September), or 2.5%.

Ellie Henderson, economist at Investec, predicts inflation will actually drop below the Bank of England’s 2% target this month (it was 2.2% in July). That would mean that today’s wages data would be used to set pensions next April.

Henderson says:

The government is likely to be paying closer attention to these wage numbers than usual, given the implications on the public purse through the ‘triple lock’ on pensions.

This is a guarantee by the government that the state pension will rise by the highest of wage growth in the three months to July, CPI inflation in September, or 2.5%. Considering that we forecast inflation at 1.6% in September, it is highly likely that at 4.0%, wage growth will be the highest of the three.

If correct, and assuming no revisions, this will result in the new full 2025/26 state pension rising by £460 per year.

Apple and Google lose EU court fights

Just in: The European Commission has won two big legal fights against US Big Tech firms this morning.

Europe’s top court has upheld a €2.42bn antitrust fine imposed on Alphabet’s Google in 2017 for abusing its dominance of the search engine market in building its online shopping service, and gaining an unfair advantage over smaller European rivals.

Apple’s attempt to avoid paying €13bn in back taxes has also been dismissed.

The EU’s Court of Justice in Luxembourg has backed a landmark 2016 decision that Ireland broke state-aid law by giving the tech giant an unfair advantage.

Back in 2020, the European general court annulled that decision – but today, the European Court of Justice has ruled that the original decision was correct.

This judgement is likely to have far-reaching effects on “sweetheart” deals for large multinationals.

Updated

Jefferies economist Modupe Adegbembo predicts the Bank of England will resust cutting interest rates again until November, especially following the rise in people finding work in May-July.

Adegbembo explains:

This month’s labour market data showed that wages continue to ease, but at the same time employment jumped by 265k — the largest increase in over two years. We think the reliability issues with the Labour Force Survey (LFS) mean the Bank of England (BOE) will not place much weight on the bounce in employment, but it should kill any lingering expectations of a September rate cut.

We continue to expect the BOE to cut next in November by 25bp, but the labour market showing signs of tightening whilst growth is rebounding makes it very hard to see the BOE delivering anything faster than quarterly cuts, even though some on the Monetary Policy Committee (MPC) may want to.

Falling inflation means that UK workers still received a welcome real-terms income boost this summer, even though wage growth slowed.

So says Louise Murphy, senior economist at the Resolution Foundation:

“While wage growth continues to weaken, even faster falling inflation over the summer means that workers have enjoyed long overdue real-terms pay rises of 2.2%. This is the kind of healthy wage growth we took for granted before the financial crisis, but haven’t seen since.

“Workers’ income boosting pay rises this summer will also deliver an income boost for pensioners next Spring, as they will drive a £460 increase in the State Pension via the Triple Lock.

“But unless we see a marked increase in productivity, this honeymoon period of real wage growth is unlikely to last for long.”

Youth unemployment hits three-year high

Youth unemployment across the UK has hit its highest level in over three years, in a sign that young people are struggling to enter the labour market.

Today’s jobs data shows that the unemployment rate among 18-24 year olds jumped to 13.3% in May-July, up from 12% in April-June, on a seasonally-adjusted basis.

That’s the highest reading since December-February 2021.

The increase suggests that as the academic year ended, some students were unable to find work.

TUC general secretary Paul Nowak says:

“Working people are still facing major problems left behind by the Conservatives.

“Vacancies have been falling for more than two years. Millions of workers are in insecure jobs and without proper employment rights. And young people’s futures are on the line as youth unemployment rises.

“Most employers support the new government’s plans to make work pay and strengthen workers’ rights. It’s time to move on from the low-pay, low-rights approach that has failed so many people so badly.”

Grocery inflation falls to 1.7%

Good news for shoppers – grocery inflation has fallen.

Data provider Kantar reports that annual grocery price inflation was 1.7% in the four weeks to 1 September, down from 1.8% last month.

That will ease some of the pressure on household budgets – but even so, Kantar also flags that nearly 60% of UK households are worried about the rising cost of their shopping

Fraser McKevitt, the researcher’s head of retail and consumer insight, says:

“This is their second biggest financial worry, only behind home energy bills.”

Kantar reports that prices are fastest for vitamin and mineral supplements, chilled fruit juices and chocolate confectionery.

But toilet tissue, dog food and bottled cola drinks are among the items whose price is falling.

Kantar also reports that online supermarket Ocado was again the fastest growing grocer with sales up 12.9% year-on-year in the last monthr.

Tesco’s sales rose by 5.3%, while Sainsbury’s grew 5.7%.

Asda struggled, though, with a 5.6% fall in sales last month – adding to the pressure on the company after a poor summer.

Updated

We also have a slowdown in real wage growth – or how fast pay packets increased after inflation.

Using CPI real earnings, regular real pay (excluding bonuses) rose by 3.0% on the year, lower than the previous three-month period when it was 3.2%, the Office for National Statistics reports.

Total real pay (including bonuses) rose by 1.9% on the year in May to July 2024.

Analyst: Pensioners won't feel richer

While the government may be handing pensioners an increase in the state pension with one hand, it is taking away the winter fuel allowance from around nine million pensioners with the other.

That controversial decision to means-test the winter fuel payment means only poorer old people – who get pension credit – will still receive it.

So much of the increase in the state pension will be eaten away by that move, and by rising prices in the shops.

Myron Jobson, senior personal finance analyst at interactive investor, explains:

“It is all but confirmed that the state pension will rise in line with average earnings, as the headline inflation figure for September is not expected to come in higher.

“While the £460 increase in the state pension may seem like a welcome boost on the surface, many pensioners won’t feel any richer thanks to the double whammy of inflation, which continues to erode the real value of any pension increment, and the loss of the £300 Winter Fuel Payment, which is now means-tested.

“Our calculations offer a stark reminder that while the state pension is a vital component of retirement income, it falls short of covering even the minimum income needed to enjoy a comfortable retirement. Worryingly, our research has exposed a looming national pension emergency, with people at the crunch stage of their retirement planning not saving enough into their pensions to secure a comfortable living standard in retirement.

Monica George Michail, NIESR Associate Economist, has spotted that wage growth in the services sector slowed in the quarter.

Today’s ONS figures indicate that wage growth continues to ease, recording 5.1 per cent in the three months to July (4.0 per cent including bonuses).

Most notably, services sector pay growth has fallen faster than expected, recording 3.8 per cent, compared to an average of 5.9 per cent in the first five months of this year. This is positive news for inflation and might provide the Bank of England with increased confidence regarding interest rate cuts”.

However, a cut might not come as soon as the BoE’s next meeting, in two week’s time.

The City money markets indicate there’s a 78% chance that the Bank leaves interest rates on hold, at 5%, and only a 22% prospect of a cut to 4.75%.

Vacancies also continue to fall.

Today’s labour market report estimates that the number of vacancies in the UK decreased by 42,000 in June to August, to 857,000.

That’s the 26th quarterly fall in a row – but there are still more vacancies across the economy than before the Covid-19 pandemic:

UK payrolls dip in July and August

The number of workers on payrolls fell in the last two months – a sign that the jobs market may have cooled a little in July.

The ONS estimates that the number of payrolled employees in the UK decreased by 6,000 between June and July 2024.

But on an annual basis, payrolls were 203,000 higher than in July 2023 .

And in August, the ONS’s early estimate is that payrolled employees decreased by 59,000 month-on-month.

Economic inactitvity dips, but still a problem

The number of people classed as economically inactive has dropped, but remains near record levels.

There were 9.298m people neither in work nor looking for a job in May-July, a drop of 136,000 in the quarter.

That has pulled the inactivity rate down to 21.9%, from 22.2% last month.

The ONS says:

The quarterly decrease in economic inactivity was mainly caused by those who are inactive because they are students, long-term sick, or retired. These decreases were partially offset by increases in those who are economically inactive because they are discouraged workers (meaning that they are eligible for employment but unemployed and not seeking work) and those inactive for “other” reasons.

Yesterday, Work and Pensions Secretary Liz Kendall held a meeting with labour market experts to discuss how to tackle economic inactivity – which the government calls ‘greatest employment challenge for a generation’.

Yael Selfin, chief economist at KPMG UK, fears the problem will not be solved fast:

“The high level of inactivity is expected to persist in the near term, as the number of long-term sick and the backlog in NHS waiting lists are likely to remain elevated. That could put pressure on the economy if demand recovers unexpectedly strongly.

Updated

UK unemployment rate drops

Today’s UK jobs report also shows that the unemployment rate has fallen to 4.1% for the May to July quarter.

That’s down from 4.2% in April-June.

During the quarter, unemployment fell by 74,000 people to 1.437 million.

And employment rose in the quarter – it’s up by 265,000 to 33.232 million, to 74.8% of the population.

Jamie Jenkins, Director of Policy at Royal London, says:

“With inflation having reduced, the ‘triple lock’ will return to wage growth as the highest measure, and this should drive a 4% increase to the State Pension from April 2025.

“The government has committed to retaining the triple lock for now, ensuring that the State Pension rises each year by the highest of average wages, inflation or 2.5%.

“Inflation drove an 8.5% increase in April 2024 and, although the 2025 increase will be lower, it still serves to ensure those in receipt of the State Pension get the best of three measures, keeping pace with wages this year, and exceeding inflation at its current level.

“However, recent data obtained by Royal London found that only half of the 3.5 million recipients of the new State Pension were paid the full weekly amount of £203.85 last year, due to gaps in their National Insurance record. Until April 2025, those who are entitled to the new State Pension may be able to fill in the gaps going back to 2006.

The BBC’s Faisal Islam has also calculated the likely increase in the state pension:

Updated

Basic pay (stripping out bonuses) rose by more than total pay in the last quarter.

The Office for National Statistics reports that average regular earnings (excluding bonuses) in Great Britain grew by 5.1% in May to July.

However, it’s the total pay increase (4%) which is usually used to set the triple lock.

Updated

State pension on track to rise 4% due to wage increases

Newsflash: UK wage growth has slowed… but pensioners on the new state pension should still be guaranteed an increase of around £460 next year.

The latest UK labour market statistics, just released, show that total pay (including bonuses) rose by 4% in the May-July quarter.

And under the UK’s triple-lock pension pledge, that indicates that the new state pension should also rise by 4% next year.

That would lift the new state pension – currently £221.20 per week – up to around £230 per week, an increase of almost £9 a week from next April.

On an annual basis, it would increase the new state pension from £11,502.40 per year to £11,962 per year, an increase of £460 a year.

The final decision on the state pension will be taken by the secretary of state for work and pensions, Liz Kendall, before October’s budget. But chancellor Rachel Reeves has already pledged the government’s backing of the triple lock until the end of this parliament.

Updated

While the pensions triple-lock seems safe under Labour, Jon Greer, head of retirement policy at Quilter, fears that the sustainability of the triple lock in the long term is questionable.

Greer explains:

It remains a contentious issue in pension policy, with no government willing to make drastic changes due to the potential backlash from a core voter base. Given recent changes to winter fuel payments which spurred immediate calls for a rethink due to the number of people who will struggle to pay their bills this winter as a result, any alterations to the triple lock by Labour seem entirely remote and more so given Rachel Reeves’ recent confirmation that it would stick by the policy.

“The debate around the triple lock often intersects with discussions on the appropriate level of the state pension relative to mean full-time earnings. There is a need for a consensus on the state pension level and a fair mechanism to ensure its value is maintained over time. Without such an approach, each uprating of the state pension risks creating generational divides. A system more closely aligned with average earnings might be more cost-effective and better reflect the nation’s overall prosperity.

“While the anticipated uplift in the state pension is positive news for pensioners, it is essential to consider the broader implications and sustainability of the triple lock policy. The government’s pension review will latterly look at pensions adequacy which must consider both state and private provision. Perhaps the review will be the mechanism to start the journey for change that removes the politics from the triple lock.”

Introduction: UK wage growth to set pensions triple-lock increase

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

We’re about to get a new healthcheck on the UK jobs market, and learn by how much the state pension should increase by next year.

The latest labour market statistics, due at 7am, are expected to show the unemployment rate dropped to 4.1% in May-July, down from 4.2% a month ago.

But wage growth is also expected to have slowed; total pay (including bonuses) is expected to have risen by 4.1% in the quarter, down from 4.5%.

And that will have implications for pensioners.

Under the UK’s triple-lock system, the state pension should rise each year by either inflation (the previous September), average earnings (for May-July), or 2.5%.

Inflation is not expected to rise sharply again this year (it was last clocked at 2.2%), so it’s today’s earnings figures that will be crucial.

The new State Pension is £221.20 a week, or £11,502 per year.

So, if wages did indeed rise by 4.1% in May-July, that would lift the state pension by just over £9 per week to around £230 per week. In annual terms, that’s over £470 more, to £11,973 a year.

Labour pledged to maintain the triple lock in their election manifesto. And last night, chancellor Rachel Reeves told a meeting of the Parliamentary Labour Party:

“Tomorrow, we get data for earnings growth, which will inform the increase in the pension next year. We are protecting the triple lock, not just for this year, but for the duration of this Parliament.”

Reeves also faces a crunch vote on the government’s controversial plan to scrap the winter fuel allowance.

The agenda

  • 7am BST: UK labour market statistics

  • 8am BST: Kantar grocery sales figures 8am

  • 9.30am BST: Mortgage lending statistics from the FCA

  • 1.55pm BST: US Redbook index of retail sales

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