The Trades Union Congress (TUC) has issued a stark warning following the Bank of England’s rate cut: the UK economy is too fragile for a “one and done” approach. General Secretary Paul Nowak welcomed the reduction to 3.75% but stressed that it is insufficient to reverse the damage caused by months of high borrowing costs. He described the economy as struggling with “stagnant demand and failing confidence,” a diagnosis supported by the recent contraction in GDP.
The TUC is championing the cause of workers who face the brunt of an economic slowdown. They argue that without a “sequence of quickfire and substantial rate cuts,” businesses will not have the confidence to invest or hire in 2026. The union fears that the Bank’s obsession with inflation targets is blinding it to the reality of job losses and industrial decline in the regions.
This perspective aligns with the views of the two external MPC members, Swati Dhingra and Alan Taylor, who voted for the cut to avert an economic downturn. They share the TUC’s concern that the labor market is cooling too fast and that consumer spending is dangerously weak. The intersection of union demands and central bank doves suggests a growing consensus that growth needs to become the priority.
However, the Bank’s “hawks” warn that giving in to these demands could lead to a wage-price spiral. They point to the 3.5% wage growth expected by employers as evidence that inflationary pressure is still building. The TUC counters that real wages need to rise to restore living standards, and that this can be achieved without inflation if the economy is growing.
As the new year begins, the TUC’s pressure on the Bank will likely increase. If the “fragile economy” continues to crack, the call for aggressive rate cuts will move from the union halls to the mainstream political debate. The 3.75% rate is a start, but for the TUC, it is just the first step on a long road to recovery.