UK stocks open the week on political uncertainty as the prime minister reshuffles his cabinet less than 100 days into office.
The FTSE is trading down 0.55% on the day as the market is hung between the political woes of the Labour party, a likely unpopular budget, and a cooling economy. The Budget will be announced on October 30, when investors are expecting it to include tax hikes.
At the same time, Keir Starmer is facing backlash for accepting expensive gifts, while eliminating the winter fuel allowance for the elderly. A series of events which has already led to one Labour party member’s resignation.
Media reports speculate that the political turmoil has also forced the Chief of Staff, Sue Gray, to resign. The rumors suppose tensions within Starmer’s team of advisors that has hindered the new government’s policies since election day.
Gray has also been the subject of leaks to the media about her pay, and some anonymous officials have blamed her for Starmer’s difficult start in office. The prime minister’s office has named Morgan McSweeney as Gray’s replacement, who’s previous role was chief advisor.
FTSE
Slower Pay Growth
According to a survey conducted by the Recruitment and Employment Confederation and KPMG, pay growth for starting pay grew by its lowest since February 2021. Its monthly permanent job placements index extended the ongoing 2-year downturn.
The survey also underlined that the number of available candidates continued to expand, while the number of open vacancies fell again. The result makes 11 consecutive months of declines, which is the fastest pace since March.
The weak data on pay growth may reassure the BoE on receding price pressures that higher salaries can place. Analysts are becoming more bullish on another rate cut by the central bank at its next meeting on November 7.
However, just last Friday the BoE’s Chief Economist, Huw Pill, made a statement of caution regarding interest rate cuts, saying he preferred a more gradual approach.