Catherine Mann, a rate-setter at the Bank of England, has emphasised the need for businesses to control price increases before any further interest rate cuts can be considered. She expressed concern over firms potentially raising prices to restore profit margins, stating: “I need to see the loss of pricing power.” Mann, who voted to maintain interest rates at 4.5%, highlighted the impact of rising goods price inflation on household expectations. Despite potential lower import prices due to trade diversions, she noted: “Goods price inflation is actually going up, not down.” The Bank’s chief economist, Huw Pill, echoed concerns about persistent wage increases affecting inflation. Goldman Sachs has adjusted its forecast, predicting UK interest rates will drop to 3% by February, contrary to earlier expectations of a lower rate.

The Royal Bank of Scotland’s latest growth tracker indicates that heightened global uncertainty and US trade tariffs are significantly affecting demand within the Scottish business community. Chief economist Sebastian Burnside explained: “The tracker this month reflects the challenges that economic uncertainty can create for businesses of all scales.” The tracker recorded a reading of 47.4, below the neutral 50 threshold, marking a decline in private sector activity for the fifth consecutive month. Despite this, there are signs of optimism, with firms expressing a more positive outlook for the year ahead. However, rising labour costs and inflation continue to pressure businesses, resulting in increased prices for goods and services. The survey also highlighted a decline in new business across Scotland, although service providers showed stronger confidence compared to manufacturers.

Research from EY reveals that the UK hosted 853 foreign direct investment (FDI) projects last year, marking a 13% decline from the previous year. Despite this drop, the UK remains one of Europe’s top investment destinations, following France, which secured 1,025 projects, and Germany with 608. The overall number of FDI projects in Europe fell to 5,383, a nine-year low. Anna Anthony, EY UK and Ireland regional managing partner, commented: “While it’s encouraging to see that the UK remains one of Europe’s top investment destinations, it wasn’t immune to the decline in FDI volume.” Factors contributing to this decline include weak economic growth in Europe, high energy prices, and political instability in France.

Nick Williams, a former senior Downing Street economic adviser, has warned that Sir Keir Starmer and Rachel Reeves will need to raise taxes due to “not credible” public spending plans. With the next budget being a crucial opportunity for change before the election, Williams writes in the Times that Reeves may face pressure to implement deeper spending cuts or tax increases to address a fiscal black hole. He points out that Labour MPs are becoming increasingly restless, calling for a more substantial investment strategy. Williams suggests combining the spending review and budget into one event to reduce uncertainty and allow for a more effective fiscal approach. He also emphasises the need for Labour to reconsider its manifesto commitments regarding tax increases, particularly in light of growing demands for investment and re-industrialisation.

Cypriot President Nikos Christodoulides is set to address over 600 attendees at Searcy’s in The Gherkin, London, to unveil a new initiative aimed at encouraging Cypriots living abroad to return home. The ‘Brain Gain’ strategy offers significant tax incentives, including a 25% tax exemption capped at £21,225 for professionals returning after seven years abroad. The government aims to attract skilled workers, particularly in the booming ICT sector, which now contributes more to GDP than tourism. Cyprus recorded £2.67bn in foreign direct investment in 2023, highlighting its growing economy and job creation in the tech sector.

The Competition and Markets Authority (CMA) is under scrutiny following a report from the Institute for Public Policy Research (IPPR) that calls for enhanced powers to regulate US tech companies like Apple and Google. The report argues that the CMA must be tougher to prevent these firms from “stifling UK businesses” through their app store dominance. The Government has recently shifted the CMA’s focus towards prioritising growth, which has raised concerns about potential weakening of regulations on major tech players. Tommaso Valletti, professor of economics at Imperial College Business School, who co-authored the report, highlights in the Times that Apple and Google’s dominance in the mobile app market could extract up to £1.4bn from UK developers this year, potentially rising to £3.3bn annually. Valletti warns that monopolistic practices hinder innovation and economic growth, stating: “Enterprise thrives when barriers to entry are low and innovation is rewarded.”

The Bank of London (BoL) is currently under investigation by the Prudential Regulation Authority (PRA), raising concerns about its operational viability. Auditors from EY have indicated that there are “material uncertainties” regarding the bank’s ability to continue as a going concern, particularly in light of a £12m loss reported for 2023. The investigation relates to historical matters predating the bank’s change in ownership in May 2024. Following the departure of key figures, including Peter Mandelson, and a significant workforce reduction, the bank’s future funding capabilities are now in question. BoL has stated it is cooperating with the PRA and has initiated its own internal investigation into the issues at hand.

Bob Diamond, the former CEO of Barclays, writes that ringfencing banks, which was intended to enhance stability, has instead led to negative consequences, including reduced competition and increased systemic risk.

Small and medium-sized enterprises (SMEs) in the UK are facing a significant challenge, with £112bn owed in late payments, according to new research by the Centre for Economics and Business Research (CEBR). The report highlights that the average overdue invoice for these firms is £42,000, which is “choking cash flow[s]” and hindering investment. Business secretary Jonathan Reynolds remarked: “This isn’t just an inconvenience, it’s holding back 5.5m SMEs which are the backbone of the UK economy.” CEBR’s head of economic insight, Christopher Breen, noted that while payment times are slightly improving, they are not sufficient to counter the increasing value of overdue invoices. Industry leaders are urging the government to implement digital strategies to reduce late payments by up to 20%.

The Government has decided to disband the National Investigation Service (Natis) following a review that highlighted its ineffective use of public funds. Established in 2020 to investigate fraud related to the £47bn Covid “bounce back” loan scheme, Natis has only secured 14 convictions despite receiving £38.5m in taxpayer money. The review concluded that “public money was not being spent effectively,” leading to the transfer of cases to the Insolvency Service. John Kent, leader of Thurrock Council, stated: “In the last 18 months, Natis has worked hard to improve their governance and deliver results for the taxpayer.” The findings will be presented to parliament today.

According to a recent Acas survey of over 1,000 employers, one in three believe that AI will enhance productivity. The survey revealed that approximately one in eight employers anticipate AI will provide a competitive advantage, potentially leading to reduced staffing needs. However, 10% of the respondents expressed scepticism, saying they saw no benefits from AI. Acas chief executive Niall Mackenzie noted: “Our survey shows optimism amongst some employers about the potential for AI to boost their productivity, decrease costs and increase knowledge.” He reiterated the significance of businesses engaging in early discussions about AI with staff and trade unions to ensure informed adoption and clear policies that reassure employees of its value.

A proposal to remove the £100 cap on contactless payments has raised significant concerns regarding potential fraud and security risks. The Financial Conduct Authority suggests that shoppers could make purchases without entering a PIN, which has alarmed industry experts. Jana Mackintosh, managing director of payments and innovation at UK Finance, commented: “Having a contactless limit is important in terms of fraud prevention.”