Bank of England governor highlights ‘substantial problem’ with UK labour data accuracy in Mansion House speech

The Bank of England’s ability to set effective interest rates is hampered by unreliable labor market statistics, according to its governor Andrew Bailey, who highlighted the lack of accurate data on the UK workforce as a “huge problem”.

Speaking at Mansion House to an audience of city funders, Bailey expressed concerns about the failure of the Office for National Statistics (ONS) to obtain adequate answers for the Labor Force Survey, which has plagued its data collection over the past 18 months. This lack of reliable information about employment status has forced the Bank to rely on alternative data measures while making crucial monetary policy decisions.

“The challenges of labor force surveying are widely recognized,” commented Bailey. “It is a fundamental issue – not just for monetary policy – ​​when we lack a clear view on workforce engagement. We could certainly benefit from more engagement across the UK with the ONS’ surveying efforts.”

Bailey’s comments underscore his growing frustration with the UK’s inability to maintain robust data on its workforce. He stressed that, along with the Treasury and other key stakeholders, the Bank continues to work closely with the Office for National Statistics to improve the quality of UK employment data.

While other advanced economies have seen a return to the labor market after the pandemic, the UK has suffered from declining labor force participation, a trend that Bailey warns could hamper economic performance. The Office for National Statistics has tried to address this issue by increasing the number of survey participants from 44,000 in 2022 to 59,000 this year, although it has warned users not to rely too heavily on short-term Labor Force Survey data to make decisions.

Bailey stressed that understanding labor supply dynamics is essential to gauge the UK’s overall economic capacity, which has come under greater pressure due to Brexit-related trade restrictions, energy price shocks, and an investment slowdown.

Boosting investment for the UK economy through reform proposed by the Mayor

At the same event at the Mansion House, Alistair King, the Mayor of London, proposed reforms to the UK’s individual savings accounts (Isas) that would encourage investment in domestic assets. King urged the government to incentivize investors, noting that full tax relief could be conditional on funds being directed towards UK-focused investments.

“Redirecting money from non-productive assets to productive assets could expand the reach of UK businesses, boost returns to savers and broaden market participation,” King said. His proposal, which he said would not require additional government funding, aims to align UK practices with those of its international counterparts.