Business confidence has plummeted to its lowest level since the pandemic, with the Federation of Small Businesses (FSB) reporting a drop to -64.5 in its confidence metric for the last quarter of 2024. The decline, a significant 40.1 points from the previous quarter, reflects widespread concern across all sectors, particularly in accommodation and food services, which fell to -111.0 points. Tina McKenzie from the FSB said: “The upcoming Employment Rights Bill is a major source of stress for small firms.”

High energy costs are pushing Britain’s chemicals industry to breaking point, ministers have been warned, after hundreds of jobs at two factories were plunged into doubt. The Chemical Industries Association lobby group has written to Business Secretary Jonathan Reynolds warning that plant closures were “inevitable” unless the UK became more competitive. The last ammonia factory in Britain was closed by Yara, the Norwegian chemicals giant, last week and then on Friday, American chemicals giant Dow confirmed that its plant in Barry, Wales, was under threat of being scaled back.

At a recent dinner for HR leaders from major UK companies, there was a palpable sense of anger regarding President Donald Trump’s actions against diversity, equity, and inclusion (DEI) in the US, writes Lucy Burton in the Sunday Telegraph. Attendees expressed a strong resolve, stating: “We need to take a stand against this.” While US firms are retracting their DEI initiatives, British HR chiefs are committed to maintaining their diversity targets. Tensions are rising between US and UK branches of global companies, with some UK managers opting to rebrand DEI efforts as “culture and inclusion” to continue their work. Heeral Gudka, a consultant on diversity strategies, noted that the current climate provides boards with “a gold-plated reason” to cut costs, including DEI initiatives. Despite the challenges, many UK executives are determined to make independent decisions regarding DEI, without external pressures.

Workers are facing significant job losses as companies prepare to make redundancies in response to Rachel Reeves’s £25bn tax raid. A survey by the Chartered Institute of Personnel and Development (CIPD) indicates that a quarter of businesses plan to cut jobs, the highest level in a decade, excluding the pandemic. Andrew Griffith, the shadow business secretary, said: “This latest research joins a pattern of reports all demonstrating that business confidence is on the floor.” Retail and hospitality sectors are expected to be the hardest hit as the National Insurance rate rises from 13.8% to 15%.

London’s recruitment landscape is facing significant challenges as firms prepare for the national insurance hike in April. According to a survey by KPMG and the Recruitment and Employment Confederation (REC), permanent placements fell for the sixth consecutive month in January, with the index at 42.9, indicating contraction. Anna Purchas, senior partner at KPMG UK, remarked: “It’s been a challenging start to the year for recruitment in London.” The survey highlights employers’ hesitance to invest due to economic uncertainty and the impending changes to workers’ rights. With a growing pool of available staff and fewer roles, pay growth rates are also easing.

The Financial Conduct Authority (FCA) is facing significant opposition regarding its proposal to “name and shame” firms under investigation, with UK Finance urging the regulator to withdraw the plans entirely. The Investment Association, representing 250 firms managing £9.1trn, warned that such actions “will…deter investment in UK markets.” This backlash comes as the FCA consults on the issue, with the deadline approaching. A House of Lords committee previously condemned the FCA for its “abject failure” in the consultation process. The FCA typically announces investigations only after deciding on sanctions, but argues that naming firms during inquiries is necessary to protect consumers. However, UK Finance cautioned that premature announcements could lead to public speculation of guilt. The FCA stated: “Our aim is to improve accountability, public and whistleblower confidence and information for consumers and firms,” while considering further feedback before making a final decision.

John Flint, the head of Labour’s National Wealth Fund, tells Bloomberg that Britain is too risk-averse with regulators too overbearing, financial institutions too cautious and society at large too timid. “The growth outcomes here are entirely consistent with our risk appetite,” Flint said. “So I don’t think we should be surprised we’re not growing. We’re not taking enough risks to grow.” Labour is attempting to spur growth by cutting regulations, but Flint, the former boss of HSBC, believes the private sector is “being very selective about the role that it plays” in driving growth. Ultimately, a new approach to risk can work well for Britain as its underlying economy is sound.

Giovanni Cespa, a professor of finance at Bayes Business School, comments in City AM on the urgent need for the Financial Conduct Authority (FCA) to implement a consolidated tape (CT) for market data transparency. Despite the FCA’s commitment to publish tender documentation for the CT by January, delays have persisted. The CT is essential for aggregating price and volume data across various trading venues, which is crucial since the Market in Financial Instruments Directive (MiFID) allowed trading away from original listings. Cespa says: “A CT can exert competitive pressure on exchanges and make markets more liquid.” The FCA aims to introduce a pre-trade tape by mid-2028, initially for bond markets, but must also address equities and ETFs promptly to enhance market liquidity and transparency.

The FT carries an interview with Doug Gurr, the new chair of the CMA, who has been tasked with attracting “the absolute maximum possible business investment” to Britain while still protecting consumers.

Chancellor Rachel Reeves has been warned that elevated taxes may deter family growth and hinder economic progress. A study by Brunel and Oxford universities highlights that South Korea’s past tax increases contributed to a significant decline in fertility rates, dropping from nearly six children per woman to just 0.78. Professor Francesco Moscone said: “As the tax burden rises, the cost of raising children increases, which can deter people from having more children.” The UK’s birth rate has similarly plummeted, reaching its lowest level since 1938, with only 591,072 births recorded in 2023. The Organisation for Economic Co-operation and Development (OECD) reports that tax accounted for 35% of GDP in the last financial year, the highest since 2000, raising concerns about the long-term implications for population growth and economic stability.

The Chancellor has the opportunity to significantly impact the lives of nearly 1m young people not engaged in education, work, or training by implementing a tax break for businesses that hire them, according to the Centre for Social Justice (CSJ). This initiative could potentially increase Treasury revenues by up to £23bn over five years, as new workers contribute taxes and reduce welfare costs. CSJ policy director Ed Davies said: “It is intolerable to pretend there isn’t a problem,” stressing the need for serious action to address youth unemployment. The proposal suggests a 40% tax break for hiring jobless individuals aged 16 to 24, with the expectation that for every £1 lost in tax rebates, the Treasury could gain £4.76 in return over five years. The scheme would require participants to have a British passport or pass a residency test to prevent misuse.

Recent data reveals that the UK economy is experiencing sluggish growth, with a mere 0.1% rise in GDP in the last quarter of 2023, leading to a forecast of only 0.9% growth for 2024. The Office for Budget Responsibility (OBR) is revising its forecasts, indicating a potential increase in the tax burden to 36.4% of GDP this year, the highest since 1950. David Smith in the Sunday Times says the economy is at risk of entering a “doom loop” where weak growth necessitates further tax hikes. Despite some optimism from forecasters, the overall outlook remains bleak, with the Chancellor facing pressure to maintain fiscal rules without introducing new tax increases.

UK boards are increasingly under threat from activist investors, particularly from the US, due to weak valuations and perceived management failures. A report by Alvarez & Marsal highlights that the UK is “the most targeted geography in Europe” for such investors. Notable examples include Elliott Management’s stake in BP, which has prompted a “fundamental reset” of its strategy, and Trian Fund Management’s successful push at Unilever. With the expectation of continued activism, companies like Diageo and ITV may soon find themselves in the activists’ sights, the Times reports.

As UK businesses prepare for significant cost increases due to national insurance and minimum wage hikes in April, the challenge of securing investment has become increasingly daunting. Joanna Jensen, an entrepreneur and chair of the Enterprise Investment Scheme Association, highlights that “growth is achieved through investment,” urging the Government to enhance incentives and reduce red tape. The British Business Bank (BBB) has £8bn to invest, yet many SMEs struggle to find private investors, stalling growth. The Enterprise Investment Scheme (EIS) offers potential solutions, but its outdated limits hinder investment. Jensen advocates for changes to EIS regulations to attract more funding, emphasising the need for immediate action to support UK businesses.

US President Donald Trump’s plans to levy tariffs on steel and aluminium imports has prompted the UK Government to put forward plans for a £2.5bn investment in the UK steel industry. The business secretary, Jonathan Reynolds, will today publish a green paper aimed at strengthening the industry. Ministers intend to turbocharge decisions on how state funds can be used to co-finance innovative projects led by the private sector. Reynolds said: “The UK steel industry has a long-term future under this government. We said that during the election, and we are delivering on it now.” Elsewhere, German Chancellor Olaf Scholz told Bloomberg that the EU is strong enough to counter any US tariff threats but that he hopes for a negotiated agreement that can avoid a trade war.

Start-ups are increasingly leveraging AI while reducing their workforce to manage costs, resulting in a significant decline in insolvencies within the small business sector. Research by PwC indicates that start-ups accounted for 46% of company insolvencies in 2024, a decrease from 60% a decade ago. John Baker, start-up specialist at PwC UK, commented: “Many have been able to embrace advanced technologies at speed, such as GenAI, to drive efficiencies and offset rising costs.” Despite challenges such as rising interest rates and increased national insurance contributions, start-ups are demonstrating resilience by quickly adapting to changing market conditions. However, they continue to face hurdles, including a shortage of venture capital funding.

The FT reports on how companies are tightening return-to-office mandates, linking attendance to performance reviews and bonuses, risking employee attrition, especially among high performers and those valuing flexibility.