Wage growth has remained strong, the latest official figures show, as the Bank of England mulls its interest rate decision.

Wages – excluding bonuses – grew 5.9% in the three months to January, the same amount as a month earlier, data from the Office for National Statistics (ONS) showed.

Meanwhile, growth in average weekly earnings, including bonuses, fell to a surprise 5.8%. Economists polled by the Reuters news agency anticipated a 5.9% rise.

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It means wage growth is still high and well above the rate of overall price rises. Inflation stood at 3% in January.

Both private and public sectors have seen rises, the ONS said, describing the growth as “strong”.

It comes as the Bank of England is widely expected to hold interest rates at 4.5% at its meeting today, in part because of the inflationary impact of wage growth.

Wage increases have surpassed the level of inflation since July 2023, something that could stop the interest rate setters at the Bank from cutting rates at future meetings.

Unsurprising unemployment

There was little change in the rate of unemployment which remained at 4.4%.

The labour market picture is “relatively unchanged”, the ONS’s director of economic statistics, Liz McKeown said.

The number of employees on payrolls is “broadly flat” with little growth seen over the last year, she added.

The ONS, however, has advised caution in interpreting changes in the monthly unemployment rate due to questions over the reliability of the figures.

The exact number of unemployed people is not known – partly because people don’t answer the phone when the ONS calls.

Some good news for government

In good news for the government, data also released today showed a fall in the number of people neither in nor looking for work.

Welfare reforms announced this week aim to bring down the number of people classed as “economically inactive“.

But the numbers have already gone down.

ONS figures showed the economic inactivity rate for people aged 16 to 64 years was around 21.5% in the three months to January, below the same time last year as well as the preceding three months.

British banks should abandon outdated ethical standards and increase lending to domestic defence manufacturers in a “patriotic” effort to ensure the UK can meet its security needs, defence suppliers have told Sky News.

The defence industry has long complained that environment, sustainability and governance (ESG) standards, intended to guide business impact on society, have prevented small and medium-sized companies (SMEs) raising finance.

With the government promising to increase defence spending to 2.5% of GDP, and the chancellor keen that SMEs in the sector should contribute increased growth, the industry believes ESG rules could hold British companies back.

Lizzie Jones of Supacat, which manufactures military vehicles used by special forces and infantry, told Sky News: “We have absolutely felt the disinterest from banks to invest in the defence industry, which has been really hard to deal with over the last few years.

“We’re hoping that the tide is beginning to change, and that actually some of the patriotic feelings that we need the defence industry, particularly right now, will help persuade the banks that investing in defence industries is good for UK growth.”

The call for support from the defence industry comes as European military chiefs meet in London to discuss operational aspects of a proposed peacekeeping force in Ukraine.

Donald Trump’s return to the White House, and his demand that European NATO partners scale up defence and lead any security guarantees for Ukraine, has forced a re-examination of defence priorities.

Rachel Reeves has sought to link increased spending to her growth agenda, and defence will form part of the industrial strategy due later this year.

Earlier this month a group of Labour MPs, and members of the defence select committee, called on banks to end “anti-defence” ESG guidelines in light of the US retreat from European security, and the need to increase support for Ukraine.

Improved access to finance is one of several demands from defence suppliers large and small, as the industry prepares for increased demand.

Certainty of contracts, a reduction in Ministry of Defence red tape, and access to cheap energy, skilled workers and critical minerals are all also required if the UK is to enjoy “sovereign capability” – the ability to build and deploy its own equipment, weapons and systems.

The call for a re-examination of ethical standards was echoed by one of the largest defence suppliers, Leonardo UK, the British arm of an Italian-listed multinational that manufactures helicopters and electronic warfare technology.

Chief executive Clive Higgins told Sky News: “The ESG agenda was really impacting small to medium enterprises where no banking was effectively taking place, and individuals couldn’t go get a bank account because they were in the defence sector.

“We’ve seen a real, really proactive response from the government over the last 12 months. I think we’re starting to see a shift in the tragic events going on in Ukraine, which helps people recognise the importance of defence at home, because that ensures we can enjoy the freedoms that you and I take for granted each day.”

The UK Sustainable Finance Association, which represents a number of major investors and pension funds, rejected the argument that the defence industry is “underinvested”.

Chief executive James Alexander said: “The notion that defence firms’ low valuations and struggles for finance is because of ‘ESG’ criteria is nonsense.

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“The UK’s ‘ESG’ (or sustainable finance) regulations at no point prohibit defence investments. While some values-based (or ‘ethical’) investors may opt against investing in defence companies, they represent a small proportion of the financial system.

“Many financial institutions, including mainstream, sustainable investors, do invest in defence. Most critical to defence companies’ prospects, though, is government spending, as highlighted by the rise in several defence stocks this year, as the UK and European allies have understandably announced increases in defence spending.”

The Financial Conduct Authority said last month that its ESG reporting rules contain nothing “that prevents investment or finance for defence companies”, implying that divesting from or avoiding defence is a choice for institutions and their customers.

The US central bank has slashed its expectations for economic growth this year as it eyes challenges on several fronts amid Donald Trump’s escalating trade war.

The Federal Reserve announced, as was widely expected, that it would keep its main interest rate at its current target range level of 4.25%-4.5% following the latest meeting of its Federal Open Markets Committee.

The statement that accompanied that decision showed slightly elevated expectations for inflation but also a forecast that the annual rate of economic growth this year had been cut from 2.1% to 1.7%.

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The reduction partly reflected weaker consumer spending, the Fed said, adding that could be partly explained by the threat of rising prices due to the tariff agenda.

The central bank admitted rising uncertainty over its dual mandate which covers employment as well as inflation.

At a news conference to accompany the decision, Fed chair Jay Powell said: “The economy is strong overall”, adding that labour market conditions were “solid”.

But on the question of rising goods inflation he said: “A good part of it is coming from tariffs”, adding that it was too soon to split non-tariff and tariff-related inflation in the data.

The core message was that it was too early to predict the impact overall.

Policymakers said risks had increased, with a near unanimous sentiment in saying the outlook for the year was muddled but it stopped short of directly blaming the protectionist policies being pursed by the Trump White House.

The Fed revealed its hand less than 24 hours before the Bank of England was expected to follow suit by also holding off on any fresh rate cut amid risks of surging prices due to the growing trade war uncertainty.

The Fed meeting took place against a backdrop of mounting concern among financial markets and economists that the trade war could lead the world’s largest economy into recession.

Stock market values are well down on where they started the year, with the broad-based S&P 500 losing $4trn in the space of less than a month at one stage as the tariff threats intensified.

The dollar remains around five cents down against both the pound and euro while US government borrowing costs also remain elevated.

Stocks rebounded somewhat on the Fed’s update as it signalled no immediate pressure for a policy shift, with the statement signalling that two rate cuts remained on the cards over the remainder of 2025.

But US economists are particularly worried about the trade war involving the country’s nearest neighbours Mexico and Canada – yet to get into full swing as had been threatened due to several suspensions by the Trump administration.

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The main domestic concern is that tit-for-tat tariffs will hammer cross-border supply chains and wider trade, leaving US businesses drowning under a mountain of red tape and higher costs, the latter being widely tipped to be passed on down supply chains and ultimately hitting consumers.

Trade war hostilities between the three are set to ramp up from 2 April – a day after the EU retaliates to US steel and aluminium tariffs with duties being applied to US goods worth €26bn.

Mr Trump has already threatened to respond with 200% tariffs on EU alcohol imports including wine and spirits.