Currys has defied a wider retail slowdown by raising its full-year profit forecast, sending shares in the electricals retailer up 12 per cent on the FTSE 250 index. The company now expects a full-year profit of £191m, up 18 per cent from its previous guidance of between £180m and £190m. Underlying sales in its main UK and Ireland business rose 3 per cent in the year to 2 May, while sales in Nordic countries climbed 6 per cent. Chief executive Alex Baldock said recent trading had been “very solid” and that the company had not yet seen an impact from the Middle East conflict, adding that its energy costs were “well hedged for the coming year”.
Dr Martens boots back with 61% profit jump
The turnaround at Dr Martens is gathering pace. The British bootmaker reported a 61 per cent rise in full-year underlying pre-tax profits to £55m in the year to 29 March, recovering from a 65 per cent decline the previous year. Revenue fell 2.9 per cent to £764.9m as the company prioritised “quality of revenue” over volume, pulling back on discounting and promotions and cutting costs, debt and stock levels. Gross margin improved by 120 basis points to 66.2 per cent.
Shoe sales were a standout performer, rising 19 per cent, boosted by models such as the 1461 Shoe, the Adrian Tassel Loafer and the Mary Jane. Sandals revenue fell 11 per cent as expected because of a lack of new products in the SS25 range, although the ZebZag range did well across sandals and mules. Dr Martens expects further strong profit growth in the current financial year, supported by operational leverage and cost discipline. The brand, which dates back to 1945 when a German army doctor designed an air-cushioned sole, was introduced to the UK in 1960 and gained popularity among postal workers, factory staff, and later skinheads and punks.
Labour market weakens as unemployment climbs
The UK labour market is showing increasing signs of strain, with the unemployment rate rising unexpectedly to 5 per cent in the three months to March, up from 4.9 per cent in February, according to the Office for National Statistics. The more volatile monthly figure shot up to 5.5 per cent in March, the highest since May 2015. Payrolled employment fell sharply in April, dropping by 100,000 – the largest monthly decline since the early days of the pandemic in May 2020, and the biggest outside Covid since records began in 2014, according to Martin Beck, chief economist at WPI Strategy. Job vacancies also dropped by 28,000 in the three months to April to 705,000, a five-year low.
The slowdown is not being felt evenly. Since payroll employment peaked in October 2024, the number of employees aged 34 and under has fallen by 296,000, while employment among those aged 35 and over has risen by more than 18,000, Beck noted. “The message from employers is clear: firms are becoming more cautious, hiring plans are being scaled back, and the balance of power in the labour market is shifting away from workers.”
Regular wage growth, excluding bonuses, slowed to 3.4 per cent year on year in the three months to March, down from 3.6 per cent in February and the slowest since October 2020. Including bonuses, pay growth picked up to 4.1 per cent, but after accounting for inflation real wages grew by just 0.3 per cent. The Resolution Foundation warned that the UK is on the cusp of its fourth period of falling real-wage growth in less than two decades, with average weekly earnings now £278 below their pre-financial crisis levels. “With inflation set to increase over the coming months, pay packets are set to start shrinking in real terms,” said Julia Diniz, an economist at the foundation.
The British Chambers of Commerce said it expects unemployment to rise to 5.5 per cent this year. Patrick Milnes, its head of policy for people and work, said: “With the conflict in Iran likely to drive higher inflation later in the year, as unemployment also rises and growth remains weak, the possibility of stagflation is very real.” He also flagged concerns over the planned removal of the lower national minimum wage level for 18- to 21-year-olds, which could deter employers from hiring young adults. Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said the UK is “on the cusp of a perilous jobs crunch”, with unemployment potentially close to 6 per cent this year as businesses face skyrocketing energy costs and declining customer demand.
Adding to the employment picture, Standard Chartered announced plans to cut 7,000 back-office roles globally by 2030, representing about 15 per cent of its support staff. Chief executive Bill Winters said the move, driven by automation and artificial intelligence, was “not cost-cutting” but replacing “lower-value human capital with financial capital and investment capital”. The bank expects to deliver a return on tangible equity of more than 15 per cent by 2028 and 18 per cent by 2030.
The softening labour market has also become a political battleground. Shadow chancellor Mel Stride used a speech at the Centre for Policy Studies to position the Conservatives as the party capable of rebuilding public finances. He defended the Tories’ record from 2010, insisting they had “fixed the roof” to afford pandemic support, and attacked Labour’s plans to increase borrowing by a quarter of a trillion pounds by changing fiscal rules. He also criticised Reform UK for “unfunded promises”, restating the Conservatives’ “golden rule” that at least half of any savings would be used to cut the deficit.
Economists noted that the weakening labour market may restrain the Bank of England. Paul Dales, chief UK economist at Capital Economics, said private-sector wage growth excluding bonuses had eased to 3 per cent, the slowest since October 2020 and below the 3.25 per cent the Bank considers consistent with its inflation target. “The weakening in the labour market suggests that the burst of inflation is more likely to be short-lived than longer-lasting and means the Bank of England may not need to raise interest rates much, if at all,” he said. James Smith, developed markets economist at ING, said the jobs data “questions the need for Bank of England rate hikes”, adding that a June rate hike was “far from guaranteed”. The Bank of England expects unemployment to reach between 5.5 and 5.6 per cent by summer 2027, while the IMF projects interest rates will be held at 3.75 per cent for the rest of 2026.
Iran conflict drives energy costs higher
The main driver of the country’s economic headwinds is the war in the Middle East. UK energy bills are forecast to rise by £209 to £1,850 a year for a typical dual-fuel household from July, according to the consultancy Cornwall Insight – an increase of 13 per cent on the current £1,641 annual cap. The surge is driven by wholesale prices that climbed sharply in February and March after US and Israeli missile strikes on Iran and subsequent retaliatory attacks damaged Gulf energy infrastructure and triggered the closure of the Strait of Hormuz, a critical chokepoint through which a fifth of global oil and gas supplies pass.
Although a temporary ceasefire brought some calm to markets, prices remain elevated. Cornwall Insight warned that the bigger concern is October, when demand picks up again and current forecasts point to a similar cap level. “Even if the conflict were to end tomorrow, the physical damage to infrastructure, and the lingering effect of disrupted supply, means a fall back to April’s price cap levels in the autumn looks unlikely,” the consultancy said. Ofgem is also consulting on a change to its definition of an “average household” to reflect the fact that average household energy use has fallen.
The broader economic impact is severe. The IMF has revised down its growth expectations for the UK in 2026 to 1 per cent, from 1.3 per cent in January, while the OECD has cut its forecast from 1.2 per cent to 0.7 per cent. Goldman Sachs estimates that traders are demanding about $14 more per barrel of oil because of increased risk, a premium that could rise further if supply disruptions persist. Brent crude averaged around $120 a barrel in April, and J.P. Morgan Global Research has warned that if prices remain elevated through mid-year, global GDP growth for the first half of 2026 could be depressed by an annual rate of 0.6 per cent. The war has also triggered severe supply chain breakdowns, with at least $25 billion in corporate losses driven by soaring oil prices, higher shipping costs and restricted trade routes. Key raw materials including fertilizers, helium, aluminium and polyethylene have seen tightened global supplies.
The pressure on energy prices has rippled through financial markets. UK government borrowing costs eased for a second day on Tuesday, with the yield on the 10-year gilt falling 5 basis points to 5.07 per cent – back to levels seen before a jump on Friday. The 30-year yield fell 4 basis points to 5.7 per cent. The moves came after Donald Trump said he had paused a planned attack on Iran to allow talks, and after Andy Burnham, the leftwing mayor of Greater Manchester and a potential Labour leadership challenger, signalled that he would not relax Prime Minister Keir Starmer’s and Chancellor Rachel Reeves’ fiscal rules. Burnham is gearing up to fight a by-election in Markerfield. Mel Stride had earlier claimed that moves in gilt yields meant Burnham was “already costing us all money” – £300 per family, he said, if the move last week was sustained. Brent crude oil fell 1.3 per cent to $110.68 a barrel, and the FTSE 100 index climbed 52 points, or 0.5 per cent, to 10,376.
