Businesses in the UK are preparing for a challenging week as significant cost increases take effect, with industry leaders warning of dire consequences for investment and employment. Helen Dickinson, chief executive of the British Retail Consortium, described the situation as a “bombshell,” stating: “This huge cost burden will undoubtedly reduce investment in stores and jobs, and is likely to lead to higher prices.” The rise in the National Living Wage, National Insurance contributions, and other overheads coincides with soaring energy and water bills. Jane Gratton from the British Chambers of Commerce warned that concerns among businesses are at “record high” levels, with the operating environment expected to worsen. Kate Nicholls, chief executive of UK Hospitality, said the rise in overheads was “eyewatering” and would mean “stark” consequences for businesses.

The latest S&P Global UK Purchasing Managers’ Index (PMI) indicates a significant downturn in the manufacturing sector, with the index dropping to 44.9, slightly above the predicted 44.6. This marks the lowest reading in 17 months, well below the average of 51.7 from 2008 to 2025. Rob Dobson, director at S&P Global Market Intelligence, noted that the outlook is “darkening” as confidence wanes, with companies facing rising costs due to changes in national minimum wage and national insurance contributions, alongside geopolitical tensions and potential trade disruptions.

Chancellor Rachel Reeves has warned that Donald Trump’s impending tariffs will “have an impact” on the UK’s economy. Business Secretary Jonathan Reynolds described the situation as a “very serious and significant moment.” The US President is expected to announce tariffs on various goods, potentially including a 20% tariff on UK imports. Professor David Miles from the Office for Budget Responsibility noted that tariffs of 20-25% could eliminate the Government’s fiscal headroom. The Government is conducting talks with the US on an economic deal which it hopes will result in the UK being excluded from the new tariff regime.

Megan Greene, an interest rate setter at the Bank of England, has expressed concern over rising public expectations for future inflation. Recent surveys from the Bank of England and Citi/YouGov indicate that inflation expectations have increased in recent months. Greene stated: “I do think inflation expectations do remain anchored, but I think it is a concern that they’ve been rising for the past six months.” Greene also commented on the potential disinflationary effects of trade wars on the UK economy, stressing the uncertainty surrounding exchange rates.

Young people may be pushed out of the job market due to Labour’s national insurance increases and minimum wage hikes, warns the Institute for Fiscal Studies (IFS). The National Living Wage for those aged 21 and over will rise by 6.7%, while the minimum wage for 18-20 year-olds will see a significant increase of 16.3%. Although the IFS acknowledges that most 18-20 year-olds won’t be directly affected, it highlights that the industries they typically work in will face the largest rise in employer costs. With over 987,000 young people currently not in education, employment, or training, the potential long-term effects on their careers are concerning.

The UK Government is prepared to reduce its digital services tax (DST) to appease US President Donald Trump, while also extending the tax to non-US companies. This concession aims to mitigate potential tariffs from the US amid fears of a global trade war. Prime Minister Keir Starmer has opted to maintain the DST, which currently generates £800m annually, as government finances are under pressure. The proposed changes could broaden the DST’s scope, potentially increasing tax revenue to £1.2bn by the decade’s end.

Non-accountant directors will be on the hook for reporting failures under new regulations overseen by the Audit, Reporting and Governance Authority, sources say.

The UK Government has proposed the Cyber Security and Resilience Bill, aimed at enhancing the security of essential services against cyber threats. Technology Secretary Peter Kyle stated: “Economic growth is the cornerstone of our plan for change, and ensuring the security of the vital services which will deliver that growth is non-negotiable.” The bill mandates that firms providing critical IT services improve their data protection and conduct comprehensive risk assessments. With 50% of British businesses reporting cyber breaches in the past year, the legislation seeks to empower regulators and protect over 200 data centres crucial for AI operations. Richard Horne, chief executive of the National Cyber Security Centre, described the bill as a “landmark moment” for improving cyber defences in essential services.

An independent investigation into the Office for National Statistics (ONS) has been initiated to address concerns regarding the accuracy of official economic data. Commissioned by the Cabinet Office and the UK Statistics Authority, the review will be led by former senior civil servant Sir Robert Devereux. The ONS has faced criticism for errors in economic indicators and delays in data publication, raising alarms among the Bank of England and other policymakers. David Miles from the Office for Budget Responsibility (OBR) noted that revisions to ONS estimates significantly impact fiscal targets, stating, “absolutely enormous” differences arise from these changes. The ONS has expressed its willingness to engage with the review process.