Clare Lombardelli, deputy governor of the Bank of England for monetary policy, has warned that young people in Britain are experiencing the worst effects of an economic slowdown driven by geopolitical tensions. The ongoing conflict in the Middle East has created uncertainty that is prompting employers to pause new recruitment while retaining existing staff, a pattern Lombardelli described as a “low-gear economy” characterized by minimal hiring and few redundancies.
Youth unemployment has risen sharply to levels not seen since 2015 outside the Covid pandemic period. The number of young people classified as not in education, employment, or training has reached nearly one million. Lombardelli noted that entry-level sectors such as hospitality and retail have experienced particularly steep declines in hiring, limiting opportunities for people beginning their careers. Employers have indicated they perceive hiring young workers as carrying greater risk than previously.
The Bank of England’s monetary policy committee voted to increase the base rate from 3.75% to 4% last week, marking the first rise in three years. Lombardelli indicated that another quarter-point increase could occur at the committee’s next meeting in December, though she stated the decision remains contingent on developments regarding the Middle East conflict, energy prices, and broader economic data. Oil prices have declined below $100 per barrel following Democratic gains in US congressional elections, which some analysts interpret as potentially constraining further escalation.
Lombardelli emphasized a concerning dynamic: while overall unemployment has risen to 4.7%, a softer labor market may not necessarily reduce inflationary pressures. Employers are selectively hiring only for positions they find difficult to fill, meaning higher joblessness could coexist with wage pressures that sustain inflation. Her remarks come ahead of a government report on youth employment issues expected to be released next week.
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