Confidence among firms in the services sector has fallen to its lowest level in nearly two years, according to S&P’s purchasing managers’ index (PMI). The index shows that business expectations for the year ahead have hit their lowest level since December 2022. It was also shown that staff numbers fell for the second month in a row in November. Analysts note that the Budget has had an impact on firms’ outlook, with concerns over the decision to increase employers’ National Insurance. S&P’s report said: “Many service sector firms noted a growth headwind due to heightened economic uncertainty and concerns about tax raising measures announced in the Budget.” The overall PMI reading fell to 50.8 in November, down from 52.0 in October on an index where a reading above 50 represents growth. Matt Swannell, chief economic adviser to the EY Item Club, said: “The results can be heavily affected by swings in business sentiment, and don’t always show genuine trends in activity,” suggesting that sentiment around the Budget “is likely to have played an outsized role in driving” the results.

While those with savings and those expecting their salary to keep up with inflation can expect their tax bill to climb by around £2,021 in 2025, those buying a house or likely to inherit some money could end up paying an estimated £21,071 extra in tax. Sarah Coles, head of personal finance, Hargreaves Lansdown, says taxes will rise as income tax and National Insurance thresholds are frozen until 2028, meaning pay rises could pull people into the tax net or push them into a higher band. She added: “At that point, it’s not just more income tax you have to worry about, but potentially higher rates on everything from dividend tax to capital gains tax, and a shrinking personal savings allowance.” She also notes that the end of the tax break on stamp duty and a rise in the capital gains tax rate for stocks and shares investors will have an impact on tax bills.

The Scottish Government’s Budget Statement revealed no alterations to income tax rates or the introduction of new tax bands for the upcoming year. Finance Secretary Shona Robison announced adjustments to tax thresholds, allowing more earnings to be taxed at lower rates. Garry Tetley, a tax partner at Deloitte, said: “Inflationary adjustments in the lower rate bands will result in small tax savings of up to £14.51 for taxpayers at all levels.” However, he noted that wage inflation could push many into higher tax brackets, with the higher rate threshold remaining at £43,662 for the fifth consecutive year. This situation continues to create a disparity, as Scottish residents earning between £43,662 and £50,270 face a combined marginal tax rate of 50%, significantly higher than the rest of the UK.

Starting next month, HMRC will require online sales platforms like eBay and Vinted to share sales data, although they assert that “absolutely nothing has changed for online sellers.” The tax office has clarified that casual sellers of unwanted items will not owe tax. However, those who sell at least 30 items or earn approximately £1,700 may need to register for self assessment. The changes aim to ensure sellers understand their tax responsibilities, with HMRC collaborating with the platforms to provide guidance. Angela MacDonald, HMRC’s second permanent secretary and deputy chief executive officer, emphasised: “We cannot be clearer – if you are not trading and just occasionally sell unwanted items online – there is no tax due.”

The Employment Lawyers Association (ELA) says the Employment Rights Bill requires “considerable thought” to avoid “swamping business” with costs or obligations. The ELA, a group of 7,000 lawyers, warned that proposed changes to zero-hour contract “will grant workers rights that are so difficult to navigate that this may well impact their ability to be enforced,” while placing difficult “recurring burdens on employers.” The lawyers added that the wording of the fire and rehire policy “means that businesses that previously survived may now not be able to act until it is too late and then go under.” The ELA says the new rights could drive an increase in claims and see a surge in tribunals.

UK equity funds saw a 41-month streak of outflows come to an end in November, with investors pouring money back into the market. While funds experienced their worst month on record ahead of October’s Budget, the flow reversed last month, with buying for all equity funds hitting a new high of £3.1bn. Data shows that £317m was deposited into UK funds. Fixed income funds saw inflows rise to £764m, while cash into money market funds came in at £131m. Property funds, however, registered their 14th consecutive month of withdrawals, losing £39m in November. Edward Glyn, Calastone’s global head of markets, cautioned that November’s rebound may be a “hiatus rather than a break in the trend,” as no significant catalysts are anticipated to rejuvenate interest in the UK market.

Former City Minister John Glen has quit a cross-parliamentary group on fairer finance following the publication of its critical report on the Financial Conduct Authority (FCA). The All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services described the City watchdog as “incompetent” and “opaque,” and said it is “slow to act and even slower to admit it has got things wrong and to change”. Mr Glen, who says he was unaware of the report’s content before it was published, said he was “dismayed” by it and the “sensationalist headlines it generated.” Mr Glen said that while he “was sure” the authors of the report had “good intentions”, it was time to “end this cycle of grievance and focus on the question of how we can enable the global respected asset that is our financial services industry, an industry that delivers £173.6bn gross value added to the UK economy, to prosper.”

The Government could create a new independent local audit regulator due to a financial crisis affecting councils. Discussions have taken place with stakeholders, including the National Audit Office (NAO), regarding the creation of the Office of Local Audit and Regulation. This comes at a time when many local authorities are facing bankruptcy, with a Local Government Association survey in October revealing that one in four could collapse without intervention. Jim McMahon, the Minister for Local Government, said: “Scrutiny of council spending is clearly important and that is why we are committed to overhauling the broken local audit system we inherited.” A spokesman for the Ministry of Housing, which has set statutory backstop dates to clear the backlog of audits, said reform was needed, commenting: “We are reviewing the evidence, including considering the recommendations of external reviews, and will update parliament shortly on our longer-term plans to fix local audit.”

City Minister Tulip Siddiq has suggested that the Financial Conduct Authority should do more to address concerns about its name and shame plans, noting that there is “discontent” within the sector.

Charlie Nunn, the CEO of Lloyds Banking Group, has warned that the scandal around motor finance deals poses a threat to the UK economy, warning that a court ruling over car loan commissions “creates an investability problem” for the consumer finance sector. This comes after judges ruled that lenders cannot pay commission to a motor finance broker without obtaining the customer’s fully informed consent. With this making it more likely that the Financial Conduct Authority will implement a redress scheme for discretionary commission arrangements, which were banned in 2021, Mr Nunn warned that this means the sector faces a period uncertainty.

The Organisation for Economic Co-operation and Development (OECD) expects the UK economy to grow at a slower pace this year than it had previously forecast. However, it has upgraded its growth forecast for next year. The think-tank expects 0.9% growth this year, down from 1.1%, while 2025 is forecast to see growth of 1.7%, up from 1.2%. Looking further ahead, it forecasts that the economy will grow by 1.3% in 2026. Globally, GDP is predicted to grow by 3.2% this year and 3.3% in 2025. Chancellor Rachel Reeves said the upgraded forecast for 2025 “will mean the UK is the fastest growing European economy in the G7 over the next three years.” The OECD said that UK interest rates are likely to stay higher for longer due to measures set out in the Budget which are expected to push up inflation. The organisation predicts that inflation will come in at 2.7% next year, having previously pointed to a rate of 2.4%.

Bank of England governor Andrew Bailey says falling inflation means there are likely to be four interest rate cuts next year. Saying that he is confident inflation will soon return to the Bank’s 2% target, Mr Bailey noted that officials expect to deliver four quarter point interest rate cuts next year. This would mean the base rate, which is currently at 4.75%, would fall to 3.75% by the end of 2025. Chris Sykes, technical manager at mortgage broker Private Finance, welcomed the comments, saying a 3.75% base rate could see the return of sub 4% home loan rates, while Ravesh Patel, director and senior mortgage consultant at Reside Mortgages, said four rate reductions in 2025 “would signal a significant shift in the mortgage landscape.”