Weak jobs data supports the Bank of England in keeping interest rates unchanged on Thursday.

British employers are cutting staff at the fastest rate in nine months, underscoring the weakness of the UK labour market as the Bank of England prepares to announce its latest interest rate decision on Thursday. Most economists expect the BoE to keep rates unchanged at 3.75 per cent on Thursday. Data published by the Office for National Statistics on Tuesday showed that the number of employees on company payrolls fell by 26,000 in August, after the previous month's figure was revised down to a decline of 19,000. The drop was larger than the 5,000 decrease economists had expected, though initial estimates are frequently revised. Demand for labour remained subdued, with vacancies falling by 8,000 to 702,000, a five-year low. The unemployment rate was steady at 4.9 per cent in the three months to July, but the ONS warned that the estimate was still affected by problems with the quality of data collection. Sterling extended its losses after the data release, falling 0.2 per cent to $1.3472. The figures suggest that the two-year slump in the UK labour market is continuing. Employers are facing greater uncertainty from the US-Iran conflict and the first Budget of Prime Minister Andy Burnham, due on October 28. Job shedding is becoming more widespread across British businesses. The redundancy rate rose to 3.9 per thousand employees in the three months to July, the highest level since the start of the year and the first increase since the three months to February. BoE split: weak employment vs high oil prices The weak labour market reduces the likelihood of second-round inflation effects seeping into the UK economy, easing nerves among most BoE rate-setters. However, concerns over the inflation outlook are intensifying after oil prices rose above $109 a barrel on Monday. Traders have increased their bets on BoE rate hikes, pricing in as many as five increases by the end of next year. Yael Selfin, chief UK economist at KPMG, said: "Today's data will reinforce the case for the dovish members of the BoE's Monetary Policy Committee that the labour market remains a key source of disinflationary pressure. High borrowing costs, weak demand and persistent geopolitical uncertainty are likely to dampen hiring." Easing the UK's youth unemployment crisis is a top priority for the Labour government, but the crisis intensified further this summer. The unemployment rate for 16- to 24-year-olds rose to 16.4 per cent in the three months to July, the highest level since 2014, reversing a period of slight decline.