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There has been a surge in the pace of wage growth but a rise in the jobless rate following a big drop in the number of payrolled employees, according to the latest official figures.

The Office for National Statistics (ONS) reported that both basic pay excluding bonuses, and average weekly earnings, rose at an annual rate of 5.6% in the three months to November.

That was up from a rate of 5.2% reported the previous month.

The ONS said the unemployment rate rose to 4.4% from 4.3%.

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The employment figures were the first to take in possible early reaction to the budget, and may suggest some employers were eager to retain key staff through strong pay awards while others sought to cut costs amid the tough outlook and ahead of looming tax rises.

HMRC payroll data and ONS survey data both pointed to lower employment.

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The number of payrolled employees was estimated to have fallen by 47,000 during the 12 months to December to 30.3 million – the biggest drop since November 2020 – according to the taxman’s figures.

That was up on the 32,000 figure recorded the previous month.

The data was seen as supporting recent private sector survey findings of a firing spree ahead of Christmas due to the impact of the budget.

The report was released against a backdrop of recent financial market turmoil, partly linked to concerns over the state of the UK economy following the 30 October budget but mainly the potential impact of a fresh Donald Trump presidency.

Sterling has lost 12 cents versus the dollar since September while government borrowing costs have risen generally, placing a big strain on Chancellor Rachel Reeves’ spending rules and bringing her stewardship of the economy under greater focus.

Last Friday, following data showing weak retail sales during the crucial Christmas month, sterling fell again but on the back of growing expectations that the mounting evidence of a flatlining economy would give the Bank of England more room to cut interest rates.

Some market commentators, and even the Bank’s newest rate-setter, believe borrowing costs will be cut four times this year though the market has currently only fully priced in two reductions.

Investors currently see an 84% probability of a Bank rate cut at the next meeting on 6 February, from 4.75% to 4.5%.

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Inflation eases to 2.5%

The last set of inflation figures, which showed a surprise easing in the headline figure, will have given the Bank some encouragement but economists see a rate back above 3% by April given expected increases in many costs, including energy and water bills, from that month.

While the budget tax measures on business sparked warnings of rising prices to offset billions of extra costs, it could also be the case that threatened hits to wages and jobs will help Bank policymakers make the argument for rate cuts.

Yael Selfin, chief economist at KPMG UK, said of the outlook: “We expect pay growth to trend downwards over the coming year, with the backdrop of slowing labour market activity.

“Forward looking indicators suggest a significant weakening in hiring intentions due to the upcoming tax rises in April. We expect this to act as a headwind for labour market activity in the near term, likely translating into a small pick up in headline unemployment over the coming months. Nonetheless, once the impact of the budget passes together with the expected improvement in economic activity, conditions should stabilise in the labour market.

“Wage growth is expected to return closer to levels consistent with the inflation target this year, despite the recent increase. The rise in business costs due to the Budget measures should have a cooling effect on labour market activity and make higher wage settlements less likely. As a result, it is anticipated the Bank of England will opt for an interest rate cut next month, and two further rates cuts in 2025.”

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US-listed Ulta Beauty swoops on high street chain Space NK

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US-listed Ulta Beauty swoops on high street chain Space NK

A New York-listed company with a valuation of more than $21bn is to snap up Space NK, the British high street beauty chain.

Sky News has learnt that Ulta Beauty, which operates close to 1,500 stores, is on the verge of a deal to buy Space NK from existing owner Manzanita Capital.

Ulta Beauty is understood to have registered an acquisition vehicle at Companies House in recent weeks.

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The exact price being paid by Ulta was unclear on Thursday morning, although one source said it was likely to be well in excess of £300m.

Manzanita Capital, a private investment firm, engaged bankers at Raymond James to oversee an auction in April 2024.

The firm has owned Space NK for more than 20 years.

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Manzanita has also owned the French perfume house Diptyque and Susanne Kaufmann, an Austrian luxury skincare brand.

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Founded in 1993 by Nicky Kinnaird, Space NK – which is named after her initials – trades from dozens of stores and employs more than 1,000 people.

It specialises in high-end skincare and cosmetics products.

Manzanita previously explored a sale of Space NK in 2018, hiring Goldman Sachs to handle a strategic review, but opted not to proceed with a deal.

None of Ulta, Manzanita, Space NK and Raymond James could be reached for comment.

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Royal Mail to scrap second-class post on Saturdays and some weekdays

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Royal Mail to scrap second-class post on Saturdays and some weekdays

Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.

From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.

The post will still be delivered within three working days of collection from Monday to Friday.

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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.

Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.

Those delivery targets are now being revised downwards.

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Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.

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The sale of Royal Mail was approved in December

The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.

A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.

It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.

A welcome change?

Unsurprisingly, the company welcomed the announcement.

“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.

“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”

Citizens Advice, however, doubted whether services would improve as a result of the changes.

“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.

“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”

Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.

Changing habits

Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.

According to Ofcom research, people want reliability and affordability more than speedy delivery.

Royal Mail has been loss-making in recent years as revenues fell.

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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.

“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.

Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.

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A pub a day to close this year, industry body warns as it calls for cut to tax burden

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A pub a day to close this year, industry body warns as it calls for cut to tax burden

An industry body has warned that the equivalent of more than one pub a day is set to close across Great Britain this year.

According to the British Beer and Pub Association (BBPA), an estimated 378 venues will shut down across England, Wales and Scotland.

This would amount to more than 5,600 direct job losses, the industry body warns. It has called for a reduction in the cumulative tax and regulatory burden for the hospitality sector – including cutting business rates and beer duty.

The body – representing members that brew 90% of British beer and own more than 20,000 pubs – said such measures would slow the rate at which bars are closing.

BBPA chief executive Emma McClarkin said that while pubs are trading well, “most of the money that goes into the till goes straight back out in bills and taxes”.

“For many, it’s impossible to make a profit, which all too often leads to pubs turning off the lights for the last time,” she said.

“When a pub closes, it puts people out of a job, deprives communities of their heart and soul, and hurts the local economy.”

She urged the government to “proceed with meaningful business rates reform, mitigate these eye-watering new employment and EPR (extended producer responsibility) costs, and cut beer duty”.

“We’re not asking for special treatment, we just want the sector’s rich potential unleashed,” she added.

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The government has said it plans to reform the current business rates system, saying in March that an interim report on the measure would be published this summer.

From April, relief on property tax – that came in following the COVID-19 pandemic – was cut from 75% to 40%, leading to higher bills for hospitality, retail and leisure businesses.

The rate of employer National Insurance Contributions also rose from 13.8% to 15% that month, and the wage threshold was lowered from £9,100 to £5,000, under measures announced by Rachel Reeves in the October budget.

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