Rates won't be rising in the UK as long as growth in wages keeps on slowing

Outlook

The Bank of England scheme will allow banks to gain access to £5 of cheap funding for every £1 they lend to SMEs (Getty)

Regardless of what’s happening Stateside, an interest rate rise on this side of the pond seems as far away as ever.

The latest data on wages and employment explain why. There was more apparently good news on the jobs front, with unemployment falling to a 10-year-low. The 5.2 per cent rate at which it currently stands has, in fact, not been seen since before the financial crisis of 2007-08.

However, what the continued tightening of the labour market does not seem to have translated into is any great increase in wages. Pay is still rising, and comfortably outpacing the still negligible rate of inflation. But the rate of increase has slowed considerably, to just 2 per cent (excluding bonuses) which was below City forecasts – quite a bit below, in some cases.

In September Ben Broadbent, the Bank’s deputy governor for monetary policy, put forward a view that the UK’s low-wage, low-skills recovery, which has attracted considerable (and justified) negative comment, was poised to come to an end.

While his speech was more full of “mights”, “perhapses” and “maybes” than you’d get from a tipster before the Grand National, he just about came to the conclusion that future job creation should major on higher-paid, higher-skilled jobs as the recovery matures.

The hedging was wise. There’s been precious little sign of that happening. Where there are skill shortages, employers have spent money on training existing staff rather than improving wages to attract new people with the attributes they need.

What this should at least do is ensure no rise in interest rates for several months, even as energy costs start to push inflation up (it wouldn’t take much of a rise from the current very low levels to have an impact).

The conditions that did so much to hand the Conservatives an unexpected majority in this year’s general election – rising wages and house prices, zero inflation, improving prospects – all came together at a very fortuitous time. Luck is a Chancellor’s best attribute, and George Osborne certainly had that when it really counted.

The new year looks set to be bumpier. Of course, even if the economic outlook starts looking less cheerful, it could easily be argued that the Chancellor can rely on his political luck with regards to his shadow, John McDonnell. Even if the economy starts to squeeze the pounds in voters’ pockets, and Mr Osborne has less to crow about, they may very well feel that they’re better off sticking with the devil they know.

Like an athlete, Adidas needs a tolerance for pain

“No one quite believed it would happen. But finally the corruption scandal was too much for even Adidas to ignore and it shocked the world by withdrawing from its deal with Fifa. The company’s big US rivals, under pressure from Washington, followed suit, shunning the world’s biggest sporting property and briefly leaving Fifa floundering. Then a saviour emerged: stepping up to the podium in a half-and-half Newcastle United/Rangers shirt, Mike Ashley was grinning like a Cheshire Cat. The 2018 tournament had become the property of Sports Direct.”

That is no more than a fever dream – or perhaps a nightmare – but Adidas created a ruffle when its chairman, Herbert Hainer, told a German newspaper that if reforms weren’t accomplished then “we would consider what the alternatives are”.

Which is subject to interpretation, and was interpreted in numerous ways by the media. They varied from “Adidas might consider pulling out” to “Adidas might consider continuing to sponsor Fifa if things don’t change”.

Adidas notably declined to join the likes of Visa and Coca-Cola in calling for Sepp Blatter’s resignation when the scandal broke earlier this year. And Mr Hainer also said in the Handelsblatt interview that he thought Fifa was on “the right course” to reform.

So the point is probably moot. The marriage will remain intact unless and until Mr Hainer is proven wrong and things get really sticky concerning Adidas’ dealings with Fifa. Put simply, Adidas needs Fifa more than Fifa needs Adidas. The company’s recent struggles have been well documented and although sales have bounced back in the US, it has surrendered both the NFL and the NBA to Nike.

The World Cup remains the world’s biggest sporting event, offering unrivalled global reach to its sponsors. Adidas needs it. Unless American investigators are able to unearth anything untoward on the specific issue of Fifa’s relationship with Adidas, the marriage will continue.

Williams & Glyn sale may lighten McEwan’s load

Ross McEwan has arguably the toughest job in banking at Royal Bank of Scotland and the past sins of past employees will doubtless continue to give him sleepless nights. He might, however, just have caught a break when it comes to Williams & Glyn, the small business-focused bank he’s having to offload as the price for the vast amount of state aid the bank has received (thanks to some of those past employees).

Bidders are circling and a planned float is on hold. A trade sale will make the much-delayed disposal quicker, cleaner and more financially rewarding. Whether it’s good news for the over-concentrated British banking market very much depends on the identity of the buyer, and what they choose to do with their new property. But that’s not going to worry Mr McEwan overly much.