The UK private sector economy experienced slower-than-expected growth last month, with businesses laying off staff at the fastest rate since the 2008 financial crisis. The final S&P Global composite purchasing managers’ index (PMI) rose slightly to 50.6 in January, indicating marginal growth, but employment numbers fell significantly due to rising payroll costs and subdued demand. Tim Moore, economics director at S&P Global Market Intelligence, noted: “The twin perils of shrinking workloads and rising payroll costs meant that many service providers put the brakes on recruitment in January.” Despite a slight recovery in manufacturing output, the overall economic outlook remains bleak, with flatlining GDP and expectations of a 25 basis-point interest rate cut by the Bank of England. Inflation decreased to 2.5% in December, but rising employer national insurance contributions and minimum wage increases are expected to further strain the economy.

The UK mergers and acquisitions (M&A) landscape is anticipated to strengthen in 2025, driven by a recent overhaul at the Competition and Market Authority (CMA). A report by Bain & Company revealed that private equity dealmaking surged nearly threefold in 2024, with the total UK M&A market reaching $133bn, a 38% increase year-on-year. Alastair Chapman, global head of antitrust at Freshfields, remarked: “In the global race for growth, the UK Government does not want the CMA to be an impediment.” The combination of regulatory changes, a focus on growth and the fact that UK-listed companies are widely viewed as undervalued is expected to lead to a more favourable environment for M&A activity.

Housebuilders are experiencing a decline in workloads, raising concerns for Labour’s ambitious target of delivering 1.5m new homes by 2029. According to the Royal Institution of Chartered Surveyors, a majority of developers reported reduced activity over the winter, attributing this to financial constraints from high interest rates, planning challenges, and labour shortages. Peter Giles, a senior associate at Faithorn Farrell Timms, noted a “lack of available finance in the housing development sector.” Ian Thomas, chairman of Abbeyfield South Downs, highlighted that “increased build costs and interest rates are making it harder to develop,” particularly for affordable housing. The overall construction industry also saw a slight dip in activity, with a net 1% of respondents indicating a decline, down from a growing market in autumn.

The House of Lords has raised concerns over the Financial Conduct Authority’s (FCA) proposed “name and shame” rules, warning that they could “unfairly damage” the reputations of innocent companies. The Lords urged the FCA to abandon its plans to publish the names of businesses under investigation unless it can demonstrate that such measures would not cause unnecessary reputational harm. Lord Forsyth of Drumlean said: “If the FCA presses ahead with its proposals… it could mean that half of the firms it investigates… will have their reputations unnecessarily and unfairly damaged.” The FCA’s investigations typically last three to four years, with 56% resulting in no further action. The Lords committee expressed concerns that the UK could become an international outlier, deterring investment. Although the FCA has adjusted its approach to provide companies with 10 days’ notice before naming them, the Lords remain “unconvinced” that this will ensure fair decision-making.

The UK’s financial services and City minister Emma Reynolds has refused to put a figure on how much risk of consumer harm the Government is willing to accept in return for looser regulations. Reynolds was responding to a question from MPs referencing a call last month from the Financial Conduct Authority for clarification on acceptable risks associated with relaxing controls on mortgage lending and other services.

The Financial Conduct Authority has been accused of registering AR Worldwide Services, a company linked to a previously rejected entity, Stallion Financial Investments. Dan Neidle, a tax lawyer and founder of Tax Policy Associates, pointed out that Stallion was denied registration in 2017 due to non-compliance and was later struck off. Neidle said: “The ‘Stallion’ should perhaps have alerted the FCA as to what was going on, but if it didn’t, one look at Stallion accounts would have done. They are obviously fake.” Stallion claims to possess £4bn in assets and a £12.5bn turnover, yet operates from a terraced house in Bolton.

A tax-free exemption for imports of goods worth less that €150 (£125) is being scrapped by the EU to prevent online retailers such as Temu and Shein from flooding the market. The EU Commission said on Wednesday that 91% of the roughly 4.6bn low-value shipments into the bloc came from China last year. Brussels also claimed that some 96% of goods sold on such e-commerce platforms do not comply with the EU’s safety standards. Going forward, online retailers deemed “very large platforms” will be made to “collect the relevant duty and VAT” and “ensure the compliance of the goods with other EU requirements,” Henna Virkkunen, the EU’s tech commissioner, said.

Every major supermarket in the UK, including Tesco, Sainsbury’s, Morrisons, and Asda, have signed a letter condemning Labour’s tax raid on farmers. The letter, organised by National Farmers Union and signed by 57 businesses across the food supply chain, states that the policy puts “the long-term stability of the nation’s food resilience” at risk and should be dropped.

Lloyds Banking Group has been ordered to pay £1bn to HMRC over the disposal of billions of euros worth of Irish property loans in the wake of the financial crisis. Lloyds had claimed £3.8bn in tax relief on losses it incurred on the assets, which it inherited as part of its £12bn government-brokered rescue of Halifax Bank of Scotland in 2008. But HMRC rejected the bank’s claim, saying it was liable to pay additional corporation tax. The tax office argued the bank’s desire to claim tax relief motivated the decision to quit Ireland. Lloyds denies this and says it will appeal.

Policymakers at the Bank of England will meet today to decide on interest rates and are widely expected to back the third rate cut in six months. The Banks Monetary Policy Committee is forecast to lower borrowing by 0.25 percentage points from 4.75% to 4.5%. Simon French, head of research at Panmure Liberum, thinks the BoE will implement six interest rate cuts this year but won’t pivot to faster cuts until late summer. French is somewhat more optimistic about declining inflation than the market consensus, which predicts three cuts in 2025.

Javier Milei, the President of Argentina, has said he will pull his country out of the World Health Organization after the US announced its own exit last month. “Argentines are not going to allow an international organisation to infringe our sovereignty, especially not over our health,” Milei’s spokesperson said on Wednesday. Referring to the COVID-19 pandemic, President Milei accused the WHO of being “the executing arm of what was the largest social-control experiment in history.”

Google has decided to abandon its objective of hiring more employees from historically underrepresented groups and is reassessing its diversity, equity, and inclusion initiatives. This move reflects a broader trend among US companies, which have been retracting their diversity efforts following the heightened focus on inclusivity after the protests against police violence in 2020. Notably, Meta Platforms has also ceased its diversity programmes, while Amazon is “winding down outdated programs and materials” related to representation. Google has yet to comment on these developments.