Bank of England’s Lombardelli warns UK’s ‘low-hire, low-fire’ labour market hurting young people – business live

Now, the Bank of England Watchers conference is about to hear from the BoE’s deputy governor, Clare Lombardelli.

She starts by talking about the UK’s labour market – which is cooling, but through “less hiring rather than more firing.”

Expounding on points she made in her interview with the Guardian this morning, Lombardelli explains:

The economy has been more resilient to the recent energy cost shock than expected.

Activity has held up better than anticipated, unemployment has risen only gradually, and redundancies remain relatively low. That may sound like good news. In lots of important ways, it is.

But a low-hire, low-fire labour market creates its own problems. It protects those already in work while making it much harder for those trying to get in or move on.

This, Lombardelli explains, creates three challenges for the Bank of England:

First, it affects how the Bank of England interpret the rise in unemployment. “If those looking for work are poorly matched to the jobs available, higher unemployment may do less to ease wage pressures than it has in the past,” she says.

Second, it can weaken productivity and growth – it’s harder for workers to find job opportunities. Lombardelli says “The costs are falling particularly heavily on young people, for whom the first step into work has become harder.”

Third, it can make the economy less able to adapt.

Young people are bearing the greatest cost from the changes in the UK jobs market, BoE deputy governor Clare Lombardelli continues.

She produces data showing that that the UK’s youth unemployment rate is now more than three times the aggregate rate, its highest relative level since the early 1990s.

Despite accounting for only around 12.5% of the labour force, 16 to 24-year-olds account for more than half of the rise in aggregate unemployment since mid-2022

Clare Lombardelli then turns to the “unusual stability” in the jobs market.

Basically, people are moving jobs less often – be that into, out of, or between jobs.

She says that there is a clear downward trend in the data:

Thirty years ago, more than 3% of employed people changed jobs each quarter. Over the past year, the quarterly rate has been a little above 2%.

This is not too far off global financial crisis lows despite much less cyclical weakness.

Clare Lombardelli then reminds her audience that there were widepread shortages of workers after the Covid-19 lockdown – which may still have repercussions today.

As the economy reopened from the pandemic, acute labour shortages were widespread. The furlough scheme and wider fiscal and monetary support prevented large-scale unemployment. The rapid expansion in demand then left firms struggling to attract the skills they needed.

Bank Agency intelligence and a range of business surveys repeatedly reported acute recruitment difficulties and skills shortages, leading many firms to place a high value on retaining experienced staff.

Memories of recent labour shortages may have led employers to be more hesitant to make workers redundant, concerned that they will struggle to find the skills they need when activity recovers.

That leads to the ‘low-fire’ labour market she is concerned about, with a consequential ‘low-hire’ knock-on effect too!

Q: Is the world heading toward a financial crisis, and can we get out of it?

Sir Jon Cunliffe (who was a senior member of HM Treasury during the 2008 crisis), tells the Bank of England and its Watchers conference that a market correction is coming.

To me it’s pretty clear that a correction will happen.

The issue isn’t whether it’s coming, it’s whether it transmits though the financial system.

Cunliffe – a former Bank of England deputy governor – explains that policymakers normally worry when they see leverage involved in a boom.

Cunliffe’s “two poles” are the dotcom bust of 2000 – which inflicted losses on asset holders without creating a financial crisis – and the sub-prime crisis of 2008, which did ripple out into a financial crisis.

The difference between those two events is the interconnection and leverage. And it looks more and more that there is interconnection and leverage this time, Cunliffe cautions.

A mrket crash could lead to a credit crunch where everyone sells everything they can, Cunliffe continues. And if that happens, the tools a central bank would use look like the tools you’d use for other crises, he adds.

Nvidia faces a “difficult road ahead”, warns Niall Hearty, partner and regulatory lawyer at legal firm Weightmans:

“Shareholder lawsuits and an independent internal investigation will mean a difficult road ahead for the world’s second-largest company, particularly as Nvidia faces wider pressure from investors amid growing concerns around AI investment and the future of the sector.

There are also wider questions to be asked about national security and the protection of commercially sensitive information at a time when the US and China are racing to gain technological supremacy.”

Q: The Americans showed valuable leadership after the 2008 crisis – do you have confidence that if there is another major crisis the US would exercise leadership again? And would they be followed?

Professor Sir David Osmand tells the Bank of England and its Watchers conference there are two kinds of crisis.

“If the financial windows have been blown in,” he expects the US to step up, as it would be in their interest.

He’s more worried about a “slowburn crisis” – such as unregulated tokenisation.

There, the interests of the US may diverge from other countries, such as those in Europe, Osmand explains.

Spencer Dale, professor of practice at the London School of Economics, says the development of AI is likely to be the most significant source of risk.

The world has “completely failed” to agree any global response to AI, or agree a regulatory response, he says.

Instead, at points of stress - such as the risks from the Mythos AI model – the US has moved the other way, keeping information to itself.

“Thus far I am not hugely comforted by the way the world has responded to the need to think about and talk about, and then sensibly regulate, AI at a global level.”

Over at the Digital Asset Summit in London, the former chancellor George Osborne is wearing one of his many hats as adviser to the crypto exchange Coinbase.

Osborne, who also recently joined the ChatGPT developer OpenAI, has suggested that the UK has the opportunity to be a leader in crypto innovation after the US mid-term elections, my colleague Lauren Almeida reports.

“The UK often has opportunity historically when the US system… can be more bureaucratic and fails to take advantage of a financial innovation.”

His comments come as the crypto industry frets over a less friendly environment in the US, where president Donald Trump’s control has been weakened by the midterm election result. His government had taken “pretty decisive steps forward on crypto regulation”, Osborne said.

Trump himself has been particularly bullish on the sector, having vowed to make the US the “crypto capital of the world” and pushed for deregulation of the industry. Last year he pardoned Changpeng Zhao — founder of the recently hacked crypto exchange Binance — who had been jailed after pleading guilty to failing to protect against money laundering.

That is not to mention Trump’s personal wealth in the sector — he made at least $1.4bn from his crypto ventures last year, according to financial disclosures he made in June.

But Osborne added that it was “too soon to know exactly what is going to happen” with the US approach to the sector.

“It is a bit simplistic to say Democrats are anti innovation in finance and Republicans are pro innovation in finance. There are [Democrats] who have led the case for innovation in the space.”

Central banks will face rising political pressure to keep interest rates low, potentially moving us towards an era of fiscal dominance, the Bank of England Watchers conference is hearing.

Professor Beata Javorcik, chief economist at EBRD and professor of economics at Oxford, cites three reasons why pressure will rise:

Rising fiscal burden. “It’s no secret that governments have been borrowing like there is no tomorrow,” she points out, citing pressures such as the Covid pandemic, and the energy shock. That has created an expectation that politiciant will step in when there’s a crisis.

Growing public demand for a larger state

Demographics, and the challenge of an aging populations. Pensions are a “very toxic topic” when it comes to the amount spent on pensions, Javorcik points out – citing opposition in France to pension cuts.

She points out that the median person in advanced economies in 1950 was 29. Now the median person is 41.

As electorates gets older, support for spending more on pensions will rise, she adds.

[Those three pressures mean governments will not want higher interest rates, as that pushes up their cost of borrowing].

Over at IET Savoy Place, on the north bank of the Thames, the Bank of England Watchers conference organised by King’s Business School is underway.

Professor Sir David Osmand, of King’s College London, is talking about the threats posed by agentic AI.

Osmand explains that frontier AI is already given elite hacking capability to unskilled actors, putting those tools within the reach of anyone with “an API key and a digital wallet”

He then cites the push towards widespread tokanisation within finance – putting real world assets on the blockchain.

And that move will create opportunities for AI to attack everything around that digital ledger.

Harking back to the crisis after the 2022 mini-budget, when UK government bond prices crashed before the Bank of England stepped in, Osmand says:

In a sense, we’ve seen this film before. Liz Truss 2022, with the LDI episode, and collateral calls from gilts forcing the bank to intervene.

That happened at human speed and excellent work by the bank that produced the next day settlement. But just imagine when that happens with a frontier AI-driven crisis at warp speed.

The reference to Liz Truss gives former Bank governor Sir Jon Cunliffe a nasty flashback. “I still have PTSD about that,” he jokes.

Bonuses for Wall Street’s investment bankers are forecast to jump more than 30% this year, but bankers have been warned to enjoy the party while it lasts.

Analysts at financial services compensation consultancy Johnson Associates estimate that investment bankers, particularly stock traders and underwriters, are due to see a 20% to 30%+ jump in the size of bonuses compared to 2025.

It will mark the third straight year of ballooning bonuses for Wall Street bankers, after a trading boom led by tech firms and AI-linked stocks. (which have of course suffered a post-US-midterm election correction).

Alan Johnson, managing director of Johnson Associates said:

“Although bank stocks have been softer this year, record results in equity trading and underwriting have made 2026 the ‘year of the bank,’ and those professionals are in line to receive the largest increases.

“Given the industry’s overall performance, we project that most professionals will see higher incentives at year-end.”

However, the consultancy warned that 2026 will mark peak growth for banker bonuses, with geopolitical turmoil, rising inflation, and frothy stock prices due to hit company fundraising plans next year. Johnson said:

“We expect 2026 to mark a peak against a potentially weaker 2027. Geopolitical turmoil, rising inflation and elevated equity valuations add uncertainty to public markets while fundraising challenges and higher interest rates continue to weigh on private markets.

“Against this backdrop, compensation strategies are likely to become increasingly differentiated, with greater dispersion based on firm and individual performance.

“Talent sourcing and retention, disciplined structures and alignment with broader business priorities will remain key focal points.”

News website The Information are reporting that Nvidia CEO Jensen Huang’s affair with a Chinese businesswoman alleged to be a spy for Beijing facilitated the shipment of at least $7.5bn worth of the company’s chips.

UK and Irish retail investors are continuing to invest in Nvidia despite uncertainty surrounding CEO Jensen Huang, according to trading platform IG.

IG reports that the number of clients buying shares in Nvidia surging 432% yesterday, compared with the average across the previous ten trading days.

Chris Beauchamp, chief market analyst at IG, says there appears to be a broad wave of investor confidence, adding:

“But this is no ordinary dip-buying opportunity.

Nvidia has become the poster child of the AI boom, and Huang has been central to its extraordinary rise. Any threat to his leadership risks shaking confidence not just in Nvidia, but in the wider technology rally.”

UK banks have begun cutting their exposure to artificial intelligence as alarm mounts that the sector could suffer a brutal correction, according to the Bank of England’s top supervisor.

Katharine Braddick told Bloomberg that the bank wasn’t being complacent, saying:

“We’re all alarmed at the moment, aren’t we?”

Banks are “all asking themselves that question” of whether to reduce exposure, Braddick added, explaining:

“I can see firms looking at their risk appetite and thinking and considering, ‘Yes this client, not that client.’ You do see it feed through.”

Nvidia’s shares are set to rally when Wall Street opens in almost five hours time.

The company’s stock is up 1.8% in premarket trading, which would recover over a third of yesterday’s drop.

Dr Ammar Ahmed from the University of St Andrews Business School says it’s too early to assess impact of the scandal on Nvidia’s long-term valuation.

“When you have multiple confounding events, it is difficult to isolate a specific one as opposed to another as having an effect on the stock market.

The current situation over the last week is a perfect storm to push down the value of AI stock. Potentially Nvidia may have compromised US national security as well as their own competitive edge. We don’t know if or what the woman, with whom Jensen Huang had an affair, has passed to the Chinese state.

Secondly there is the political and legislative risk that comes from that. If Nvidia have failed on their part to protect US security around AI, the federal government could step in and regulate or impose some additional oversight that constrains not only Nvidia’s activities but potentially the entire sector in the future.

It is enough to move the market as the reaction is around pricing as much as it is around valuation. With pricing, short-term traders in financial markets can take advantage of swings in share prices and make money from this shift in short-term expectations. But how these events affect the long-term valuation of a company is too early to see. It’s a wait and see game, particularly around what the democrats do. Until you see the outcome of those things still in play, it’s difficult to get a clearer picture of the long-term prospects for AI companies.

“Already there’s been a rebound in tech share prices today, which is a sign that some investors may believe the recent events represent an overcorrection. But a one-day bounce reflects market sentiment rather than a reassessment of long-term value, and until the outstanding questions are resolved, prices are likely to remain volatile.”

Vodafone has cut 3,000 jobs across its European operation, as the telecoms company looks to make €2bn in cost savings by the end of the decade.

The UK-headquartered company said that the roles had been cut between April and September, helping to deliver €200m in cost savings.

This included €50m from its UK operation where the company continues to focus on synergies after it bought out the 49% stake it did not already own in VodafoneThree.

The company has said it expects to deliver £1bn in annual savings at VodafoneThree, the UK’s largest mobile operator, by 2032.

On Monday, the company announced a separate round of 2,300 job cuts in Germany, Vodafone’s biggest market, over the next two years.

On Tuesday, the company raised its profit and cash flow guidance for the current financial year, after reporting that group-wide revenues increased 11.4% year-on-year in its first half. In the UK, revenue increased 10% to €4.9bn.

The company said it now expects earnings before tax to come in at €13.2bn to €13.4bn for the year, following a previous range of €13bn to €13.3bn. The cash flow estimate was upgraded from €2.8bn to €3bn.

Vodafone reported 6.4% growth in adjusted earnings to €6.45bn for the first half.

Overall, the company reported a €3.6bn loss in the first half, after booking an almost €5bn impairment charge in Germany.

“I am very happy about our overall group performance, but Germany is not yet where it needs to be,” said Margherita Della Valle, Vodafone’s CEO.

Vodafone’s share price dipped slightly on Tuesday, but is up almost 30% over the last year.

Nvidia CEO Jensen Huang is drawing both sympathy and disbelief in his birthplace Taiwan, where he ⁠has rock star status.

Reuters reports that the ⁠dramatic revelations of his ​affair with a woman who could have been a Chinese spy have not dented Huang’s popularity.

Shock at news that both Nvidia’s board and the FBI are investigating to determine if Huang was targeted by a ⁠foreign intelligence effort is palpable in the small Taipei businesses and restaurants he frequents on trips.

“I thought it must be ​a lie, or fake news,” said Hsiao Kui-yu, whose ‌store selling dried and candied fruit ‌is among Huang’s inevitable stops at Taipei’s Siping market.

“We think of him as such a good boss, who ‌takes such good care of people. How could something like this happen? Is it possible? I’m very suspicious,” Hsiao, 68, told Reuters.

Huang’s barber Ray Wang, whose high-end shop is just around the corner from the luxury hotel where Huang often stays, said the two formed a bond when the CEO first visited in 2017.

“Every day I pray for Mr. Huang, hoping he gets through this difficult time,” the 57-year-old added. “I really want to ‌write him a letter of encouragement, but I feel this isn’t a good time, because he’s very busy.”

British shoppers have been stocking up on essentials such as bottled water, tinned goods and hand sanitiser, but did not panic buy after the government advised people to prepare for emergencies, shopping data has shown.

Sales of essentials jumped in the 10 days after the government launched its Be Ready campaign, which encourages households to prepare for up to three days in the event of disruption to essential services from incidents such as cyber-attacks or extreme weather.

In the 10 days after the campaign launch, sales of hand sanitiser surged by 83% compared with the same period last year, while sales of bottled water rose 67% and tinned and jarred goods went up 37%, according to Worldpanel by Numerator’s monthly grocery report for Great Britain.

The number of people buying tinned meat each day after the launch of the campaign rose by 43%, equivalent to an extra 400,000 shoppers a day, but the typical amount bought remained at about 500g in terms of pack size.