FTSE 100 Slips as UK Unemployment Rises to 5.1% and Wage Growth Slows

TLDR

Table of Contents

UK unemployment rises to 5.1%, its highest level in nearly five years.
Wage growth slows to 4.6% in August-October period, falling from 4.7%.
The Bank of England is expected to reduce interest rates amid weaker job market data.
Ford plans $19.5bn in charges as it revises its electric vehicle strategy.

UK unemployment has risen to 5.1%, marking its highest level in nearly five years, signaling a slowdown in the labor market. Coupled with slower wage growth, this has raised expectations for an interest rate cut by the Bank of England. Meanwhile, the FTSE 100 and European stocks dipped, reflecting broader economic concerns, while Ford’s major shift in its electric vehicle strategy also drew attention, impacting market sentiment.

FTSE 100 Falls Following UK Job Market Weakness

The FTSE 100 index declined by 0.5% on Tuesday, following broader market trends that saw European stocks also dip. This decline came after the latest UK job market report indicated signs of weakening labor conditions.

The Office for National Statistics (ONS) reported that the UK’s unemployment rate had risen to 5.1% in the period between August and October. This figure marked its highest level in nearly five years and signaled a shift towards a more challenging economic environment.

At the same time, wage growth, a key factor influencing the Bank of England’s decisions on interest rates, showed signs of slowing down. Annual wage growth, excluding bonuses, fell from 4.7% to 4.6%. The ONS noted that the number of employees on payroll had decreased by 149,000 compared to the previous year, further adding to concerns about a weakening labor market.

BoE Rate Cut Expected Amid Economic Concerns

The rise in unemployment and the slowdown in wage growth have led to growing expectations that the Bank of England (BoE) will announce another interest rate cut later this week. The BoE is widely expected to lower rates to 3.75% in light of the weakening job market and the ongoing challenges faced by businesses.

Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, commented that while a rate cut before Christmas might be welcomed, the broader economic outlook remains uncertain. “With businesses under pressure and job security at risk, employers are becoming more cautious in their hiring decisions,” Haine said.

The economic outlook for 2026 remains fragile, with concerns about a potential recession and sluggish growth. Although inflation has eased, the BoE will be closely monitoring the ongoing economic indicators before taking any further actions.

Impact on Major Companies and Sectors

The weakening economic conditions have also had an impact on major companies. The FTSE 100 saw notable declines in stocks like BAE Systems and Babcock International, with oil giants Shell and BP also contributing to the index’s fall.

Shell and BP’s stock prices have been under pressure as discussions around mergers and acquisitions continue to be in focus. There were reports earlier this year that Shell’s M&A chief had failed to convince senior management about a bid for BP, casting doubt on the likelihood of any significant deal between the two oil companies.

The energy sector’s ongoing struggles reflect broader concerns about the economic environment. With businesses and investors focusing on maintaining stability, any major changes or mergers could potentially disrupt operations and add to the uncertainty surrounding the energy market.

Ford’s Strategy Shift and Special Charges

Ford Motor Company also made headlines on Tuesday after announcing that it expects to take $19.5 billion in special charges tied to its retreat from parts of its all-electric vehicle strategy. The carmaker revealed that it would recognize most of these charges in the fourth quarter, with a further $5.5 billion in cash charges spread through 2027.

Ford’s shift in strategy reflects the company’s decision to scale back investment in certain electric vehicle operations amid weaker-than-expected demand. The company also announced plans to replace its fully electric F-150 Lightning truck with an extended-range model that uses a gas-powered engine to recharge the battery.

Ford is also scrapping the next-generation electric truck, codenamed T3, as well as planned electric commercial vans. This pivot highlights the challenges faced by the electric vehicle industry as it navigates fluctuating demand and changing market conditions.

Global Market Trends and Economic Outlook

Across Europe, stock indices also experienced declines. Germany’s DAX fell by 0.5%, while the French CAC 40 dropped by 0.2%. The pan-European STOXX 600 index saw a similar decrease. These declines reflect a broader global trend influenced by rising unemployment in the UK and concerns about economic growth across the continent.

The US markets were also impacted by these developments. Ford’s announcement about its strategy shift and charges made the company’s stock one of the most-watched tickers on Yahoo Finance. Despite these concerns, the pound showed some strength against the US dollar, trading up 0.4% to just above $1.34.

As investors monitor the broader economic landscape, the upcoming decisions from the Bank of England and corporate strategies in response to weaker economic conditions will continue to shape market sentiment.