UK labour market weakening amid Brexit uncertainty

LONDON—Brexit uncertainty appears to be finally affecting Britain’s labour market, which has been relatively resilient over the past three years in spite of a slowdown in economic growth.

The Office for National Statistics said Tuesday that the number of people in work dropped by 56,000 in the three months to August from the previous three-month period, to 32.69 million. That’s the biggest decline since the spring of 2015.

The number of people unemployed rose by 22,000 during the period 1.31 million, lifting the jobless rate to 3.9% from 3.8%. Job vacancies were also at their lowest level for nearly two years.

In another sign of weakness, earnings growth including bonuses slowed to 3.8% in the three months to August from the year before, from the 3.9% rate recorded in July.

“The Brexit-related slump in corporate confidence finally has taken its toll on the labour market,” said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.

Since Britain voted to leave the EU in June 2016, the labour market has been strong as firms have opted to cut investment rather than staff. However, a decline in confidence in the past few months as the country grapples with Brexit seems to be taking its toll.

Some of the uncertainty could be lifted in coming days if Prime Minister Boris Johnson secures a Brexit withdrawal agreement with the EU. Should any deal be backed by lawmakers, Britain could be on track to finally leave the EU by the scheduled Brexit data at the end of this month, if not slightly later.

Though the long-term trading relationship with the EU would still need to be negotiated, a near-term Brexit deal would mean Britain avoids a chaotic exit that most economists think would cause big economic difficulties.

Others in Parliament are hoping they can use the Brexit standoff to push through another referendum on Britain’s membership in the hope that the country votes to remain in the bloc and ensuring frictionless trade with the EU.