The UK shed payrolled employees at the sharpest pace since late 2025, and the timing could not be more loaded. British employers shed workers at the fastest rate in nine months ahead of the Bank of England’s latest rates decision on Thursday. The number of employees on company payrolls slipped 26,000 in August after a 19,000 fall in July, the Office for National Statistics reported Tuesday.
Job vacancies fell to a 12-year low while pay growth held steady, the ONS added. Average weekly earnings, excluding bonuses, grew by 3.5% in the three months to July compared with the same period in 2025. The unemployment rate held at 4.9%. Steady wages and a stable headline rate give the hawks on the Monetary Policy Committee no fresh ammunition, but the accelerating payroll decline gives the doves more cover.
The Vote Already Points One Way
The Bank of England held the base rate at 3.75% on July 30 in a divided 6-3 vote, with three members wanting a hike to 4.00%. The three dissenters, Megan Greene, Catherine L Mann and Huw Pill, each preferred a 0.25-point rise. That is one more hawkish dissent than June’s 7-2, meaning the minority pushing for higher rates has grown across the past two meetings.
Tuesday’s data does not settle the argument. The September decision is not simply a question of whether inflation is rising. The key question is whether higher energy costs are feeding into wider prices and wages strongly enough to produce a five-member majority for a rise. If all three July hawks hold their position, just two of the six July hold votes switching sides would be enough to produce a 5-4 majority for a hike.
What Traders Are Watching
Sterling extended its second straight daily decline against the dollar at the London open, leaving GBP/USD hovering just above five-week lows near 1.3465. Jobless claimants jumped by 27,800, far above expectations, adding to the soft tone across the release. The Bank of England has also scheduled no sales of long-dated gilts with maturities of more than 20 years in its current quarterly gilt sales programme, a shift Reuters reported in June as volatility pushed up borrowing costs. That will keep gilt traders focused on Thursday’s decision statement for any guidance shift.
The consensus still expects a hold. ING’s UK economist James Smith expects the Bank of England to hold rates 6-3 at Thursday’s meeting rather than pivot hawkish. Wage growth has settled near a floor consistent with the BoE’s 2% inflation target, Smith added, meaning a hawkish surprise this week looks unlikely absent a further run-up in energy prices.
The Data Sequence That Matters
The next major data point before the decision is August’s CPI figure, released by the ONS at 7:00am on September 16, the day before the MPC announces. The consensus points to both headline and core inflation picking up in August, with the headline rate forecast to rise from 2.9% to 3.1%. A number that comes in above that forecast, particularly with energy still elevated, raises the probability that at least one hold voter reconsiders. A figure in line or below keeps the 6-3 split intact and removes near-term pressure on sterling.
Cheat Sheet
- Top Theme: UK labour market deteriorating faster than expected, complicating an already divided BoE into an active hawkish minority ahead of Thursday’s vote.
- Asset to Watch: GBP/USD near 1.3465. A hold confirmed 6-3 likely steadies sterling; any hint the vote is closer than 6-3 sends it lower.
- Sector to Watch: UK rate-sensitive sectors, particularly UK homebuilders and FTSE financials, both exposed to any surprise shift in Bank Rate expectations.
- Biggest Risk: August CPI tomorrow morning prints above 3.1%. That is the single number most capable of shifting the September vote outcome before the decision is announced.
- One Thing to Remember: The vote split is frequently the real market event. A 5-4 outcome when 7-2 was forecast moves markets even when Bank Rate itself is unchanged. Watch the minutes, not just the headline decision.
