By Suban Abdulla and William Schomberg
LONDON (Reuters) - Britain's statistics agency cautioned on Tuesday that the shift to its new, improved labour market survey may be pushed back to as late as 2027, dealing a fresh blow to the Bank of England as it tries to assess inflationary pressures in the economy.
The Office for National Statistics has struggled to reach respondents for its surveys since the COVID pandemic and is overhauling the way it measures the labour market.
The BoE relies on the ONS' labour market data as part of its decision-making process on interest rates. BoE Governor Andrew Bailey said last week that the lack of a clear picture on employment was "a substantial problem".
The central bank is closely monitoring Britain's labour market as it considers the timing of its next interest rate cut, after reducing borrowing costs twice this year.
There were "a number of potential scenarios" for when the new Transformed Labour Force Survey could be rolled out, the ONS said.
"Transitioning in mid-2025 is now unlikely, given current quality concerns," the ONS said in an update on the process.
"Aiming to complete this process in 2027 would allow us time to implement the shorter survey with further periods of parallel run" with the existing LFS, it said. "We are continuing to explore options to minimise the time frame to transition."
The agency said it was testing a shorter survey to boost response rates and potentially halve response times to 15 minutes, as well as undertaking more fieldwork.
It is also exploring mandatory participation in the LFS, as is the practice in some European countries.
An update on the timings would be announced in early 2025, the ONS said.
INACTIVITY RATE STILL ABOVE PRE-COVID LEVELS
The Resolution Foundation, a think tank, said last month that the official labour market data may be failing to count almost one million people who are in work, while overstating the size of the country's problem with people dropping out of the labour market altogether.
But the ONS said a problem with people leaving Britain's labour market appeared slightly less acute than previously thought as it adjusted its calculations based on new population estimates.
The inactivity rate - which measures people not in work and who are not looking for it - was estimated at 22.1% in the April-to-June period, compared with a previous estimate of 22.2%, the ONS said.
However, Britain's inactivity rate remains above the 20.8% where it stood immediately before the pandemic, according to the ONS data, in contrast to other countries where it is now lower.
The agency also published new estimates for Britain's employment and unemployment rates.
The re-weighted employment rate was estimated at 74.6% in the new data, versus 74.5% previously, while the unemployment rate was unchanged at 4.2%.
Britain's productivity problems appeared worse than previously estimated as the ONS revised down estimates of growth for output per hour worked to minus 0.9% from minus 0.3% for the three months to June compared with a year earlier.