The accuracy of UK’s labour data has been questioned by the Bank of England’s governor, Andrew Bailey, highlighting critical challenges in economic decision-making.
- Bailey addressed the incomplete responses in the Labour Force Survey impacting the Bank’s reliance on economic data for policy decisions.
- Concerns over the UK’s declining workforce participation rate were noted as a significant risk to the country’s economic health.
- Efforts to improve data collection are underway, but quality of information remains an issue, especially post-Brexit and during global economic shifts.
- Parallel discussions included proposals to boost domestic investment via reforms to the UK’s Individual Savings Accounts, aimed at strengthening economic resilience.
During a recent speech at Mansion House, Andrew Bailey, Governor of the Bank of England, expressed serious concerns regarding the accuracy of the UK’s labour data. He pointed out that the Office for National Statistics (ONS) has been struggling to gather sufficient responses for its Labour Force Survey over the past 18 months. This inadequacy has compelled the Bank of England to rely increasingly on alternative data for making vital monetary policy decisions.
Bailey emphasised that while challenges in obtaining accurate labour force data are recognised, the lack of clear insights into employment status poses a substantial issue, not only for monetary policy but also for understanding workforce participation. He stressed the necessity for greater engagement with the ONS’s data collection efforts, to better inform economic strategies.
The governor warned that the UK’s ongoing challenge in labour market participation, unlike other advanced economies witnessing post-pandemic re-entry, could hinder the nation’s economic performance. Alongside the Treasury and other stakeholders, the Bank is actively collaborating with the ONS to enhance the quality of labour data.
The ONS has increased its survey participants from 44,000 in 2022 to 59,000 currently, in an attempt to address the issue, yet continues to caution against over-reliance on short-term survey data. Understanding labour supply dynamics is crucial for assessing the UK’s economic capacity, particularly amid obstacles like Brexit-related trade barriers, rising energy costs, and limited investment.
At the same event, Alastair King, lord mayor of London, proposed reforms to the UK’s Individual Savings Accounts (Isas). These reforms aim to encourage investments in domestic assets by offering full tax relief on funds directed towards UK-focused investments. He argued that shifting funds from non-productive to productive assets could amplify the growth of British firms, improve returns for savers, and expand market engagement, without requiring additional government expenditure.
Addressing the UK’s labour data challenges is essential to ensure informed economic policy decisions and sustained economic growth.
