Rob Morgan, chief investment analyst at Charles Stanley:

'To what extent the picture changes once increases to employers’ costs takes effect in April remains to be seen. Some businesses will err towards passing on the higher costs through price increases rather than reducing headcount. This could push up services inflation but keep unemployment low despite a drop off in hiring – creating a dilemma for the Bank of England in its battle against price rises.'

Yorkshire Water has been forced to pay out £40million to address failings over its handling wastewater and sewage.

Industry watchdog Ofwat said a probe into the company found 'serious failures' over how it operated and maintained its sewage network.

The utility's failures resulted in excessive spills from storm overflows, according to the regulator.

Nicholas Hyett, investment manager at Wealth Club:

'The UK Labour market held firm in January, with little change from the Christmas period. That's in line with expectations but will still be a bit of a relief for the government given worries that rising minimum wages and increased employers national insurance costs might see employers look to trim their wage bills.

'Average wage growth continues to comfortably outpace inflation, which should continue to ease the cost of living crunch consumers experienced in the aftermath of the pandemic. That is good news for the economy more broadly - helping to boost domestic demand.

'The big unknown is whether this resilience will continue as the deadline for higher employment taxes looms in April.'

Federal Reserve chief Jerome Powell last night warned of ‘turmoil’ created by Donald Trump as he forecast lower growth and higher inflation.

America’s central bank now expects the economy to expand by 1.7 per cent this year, down from a previous forecast of 2.1 per cent. And it sees inflation for 2025 at 2.7 per cent, revised up from 2.5 per cent.

It comes after Trump imposed swingeing trade tariffs on its major trading partners China, Mexico and Canada – slapping a tax on goods coming into the US from those countries.

Yorkshire Water will pay an enforcement package of £40million after an Ofwat investigation found 'serious failures' in how the utility has 'operated and maintained its sewage works and networks'.

The package, which cannot be paid for with higher customer bills, will largely pay for work on some of the 'most problematic storm overflows in environmentally sensitive areas' to ensure they spill less than 20 times a year.

A contribution to the Great Yorkshire Rivers Partnership will also be made, while Yorkshire must also commit to an action plan 'to ensure all of its storm overflows are compliant with legal requirements'.

Lynn Parker, senior director for enforcement at Ofwat, said: 'Our investigation has found serious failures in how Yorkshire Water has operated and maintained its sewage works and networks, which has resulted in excessive spills from storm overflows. This is a significant breach and is unacceptable'

Thomas Pugh, economist at firm RSM UK:

'Rising employment, a steady unemployment rate and strong wage growth has removed what little chance there was of an interest rate cut this afternoon. The next rate cut will probably come in May, but further rate cuts after that will depend, in part at least, on pay growth slowing.

“There has, so far at least, been no sign of the collapse in employment signalled by most of the labour market surveys.

'While it would be a stretch to say that the UK labour market was strong, it’s clearly not collapsing. We continue to expect a slight weakening this year as firms press pause on hiring in the wake of the budget, but there are no signs of surging unemployment.

'However, pay growth remains far too strong for the MPC to relax.

'We expect wage growth to slow this year as a weakening labour market eases competition and firms try to mitigate the increase in national insurance contributions through slower wage growth.

'But pay growth has remained stubbornly high, despite the collapse in sentiment. Stubbornly strong pay growth is a big risk to our forecast of three further rate cuts this year.'

Private-sector pay excluding bonuses - a key gauge of domestic inflation pressure for the BoE - rose by 6.1 per cnet the three months to January, compared with the same period a year earlier, marginally slower than an increase of 6.2 per cent in the last three months of 2024, the Office for National Statistics said.

Pay growth across the economy, excluding bonuses, stood at 5.9 per cent, unchanged from the fourth quarter and in-line with forecasts.

Including bonuses, pay was up 5.8 per cent, slowing from 6.1 per cent in January and slightly lower than the 5.9 per cent forecast by economists.

The Bank of England will later today reveal its latest decision on the direction of interest rates, with policymakers set to weigh lacklustre economic growth and fears or resurgent inflation.

Financial markets expect the bank’s Monetary Policy Committee to hold base rate at its current level of 4.5 per cent.

It follows the US Federal Reserve's decision to keep borrowing costs in the range of 4.25 to 4.50 per cent, as it keeps a watchful eye on inflation in light of US President Donald Trump's tariff plans.