19 March 2026
"For employers, conditions remain challenging. Hiring appetite has yet to recover and the drag from higher wage floors, national insurance, business rates and new employment rules continues to show through. The structural impact of AI is also clearly being felt in some sectors. Any tentative improvement in business sentiment has been overshadowed by the renewed surge in oil prices, raising operating costs and feeding through to consumer bills. The risk is that inflation ticks higher again even as the jobs market weakens.
"Wage growth of 3.9% keeps pressure on policymakers, but the Bank now faces a choice between responding to near‑term inflation risks or prioritising an economy that is struggling to generate momentum. Predictions of a potential rate increase later in the year are beginning to surface, but are intertwined with the opaque objectives of the US government in the Middle East and the rather more tangible goals of the Iranian regime to cause maximum disruption to global markets. As such, the path of rates from here are far from assured.
In the near term, the data arguably gives the Bank little room to act. A spring rate cut looks firmly off the table, yet moving the other way would risk tightening policy into a labour market that is already under strain. The reality is the Bank may have to look through the inflationary shock from Iran and focus instead on domestic employment weakness. Until confidence improves, both growth and the jobs market are likely to remain fragile.”
