OUTLOOK
Tax concerns hit business confidence

City AM

Confidence among British businesses has significantly declined due to Labour’s tax policies, with a survey by the British Chambers of Commerce (BCC) revealing that 56% of firms are worried about their tax burden. While the number of firms that expect to put prices up over the next three years has fallen from 55% to 44%, the BCC has described overall confidence as “weak,” with less than half of firms forecasting an increase in turnover within the next 12 months. The BCC has urged the Government to avoid additional tax increases in the Budget. While Shevaun Haviland, director general of the BCC, noted that “the rising cost of doing business means confidence levels remain at their lowest levels since 2022,” David Bharier, head of research at the BCC, said: “April’s rise in National Insurance contributions has cemented tax as the dominant concern for firms.”

Hospitality sector ‘is being taxed out of existence’

City AM

The Government has been warned that the hospitality sector is struggling under the burden of higher taxes. With the rate of employer National Insurance climbing from 13.8% to 15% and the threshold for payment being lowered, Liberal Democrat MP Alistair Carmichael has warned that hospitality “is being taxed out of existence,” while Conservative MP Andrew Griffith suggested that the Government’s approach to hospitality has been “hostile.” Data shows that since the National Insurance changes were announced in October’s Budget, the hospitality sector has cut 69,000 jobs. MPs have called for measures to help support the sector, suggesting that business rates should be reformed and National Insurance should be reduced.

Takeovers surge in H1

City AM

Research by Peel Hunt shows that the UK is on course for its biggest year of takeovers since 2021, with offers worth £74bn made to UK firms in the first half of the year. It was also found that contested takeovers are at a five year high. Analysis shows that US firms accounted for more than a quarter of buyers, with 14% of all bids involving US private equity firms. UK firms accounted for 63% of bidders in H1, exceeding the 46% average recorded over the last five years. Michael Nicholson, head of advisory and M&A at Peel Hunt said US private equity firms “have met their match in the form of UK-listed consolidators.”

TAX
Non-doms hope for policy U-turn

Wealthy non-doms are holding onto their UK properties rather than selling, amid hopes that Chancellor Rachel Reeves might reverse a decision to charge inheritance tax on global assets. Property agencies have reported a surge in clients requesting management of vacant homes, indicating they want to keep the option open to return if economic conditions become more favourable. Analysis suggests that if a significant portion of non-doms leave the UK, it could cost the Treasury up to £12.2bn, undermining the fiscal gains intended by the policy. Rachel de Souza of RSM said: “The extension of inheritance tax to include offshore trusts settled by non-doms was the key tax change that led to the exit of some ultra-high-net-worth individuals from the UK.” She added: “Confirmation that the assets in those trusts would continue to be protected from inheritance tax could see some of those who have left return, and may put a halt to the emigration of those who have not already left.”

Minister commits to tax pledge but refuses to rule out hikes

BBC News The Daily Telegraph The Independent The Guardian

Cabinet Minister Pat McFadden has reaffirmed Labour’s commitment to its election promises on taxes, despite recent concessions on welfare reforms that jeopardise £5bn in savings by 2030. Mr McFadden said the Government “will keep to the tax promises that we made in our manifesto,” ruling out increases in income tax, National Insurance or VAT. However, he has refused to rule out increases in tax elsewhere. Asked on BBC Breakfast whether he could rule out tax rises, the Cabinet minister told the programme: “I’m not going to speculate on the Budget,” adding that “it doesn’t make sense for me to speculate on something where … there are so many moving parts of which this is only one element.” Separately, Mr McFadden told Times Radio that there will be “financial consequences” to the Government’s concessions on welfare budget reforms.

Reeves refuses to rule out extending freeze

Rachel Reeves has refused to commit to ending the freeze on income tax thresholds in 2028, despite previously pledging not to extend it. When asked whether she will “stand by the commitment” to end the freeze from 2028, the Chancellor declined to answer and instead referenced the “£22bn black hole in the public finances.” The freeze, introduced in 2022, has already pushed 7m people into higher tax brackets, raising £15bn.

Budget gap could mean tax hikes

Daily Mail

Analysts believe that Labour may impose significant tax increases following a U-turn over proposed welfare budget cuts. The Prime Minister’s plans, intended to save £5bn annually, have now resulted in an additional £100m in spending. Chancellor Rachel Reeves faces a substantial gap in her budget, which may necessitate further tax hikes, cuts to public spending, or increased borrowing. The Institute for Fiscal Studies’ incoming director, Helen Miller, said that with spending plans locked in, tax rises appear increasingly likely.

REGULATION
FCA extends rules on bullying, harassment and violence

Financial Times Reuters The Times The Guardian The Independent

The Financial Conduct Authority (FCA) has extended rules on bullying, harassment and violence in an effort to “deepen trust in financial services.” Clarifying its remit around “non-financial misconduct” in the sector, the FCA said that while it has often been unclear when bullying and harassment would amount to a breach of conduct rules in firms other than banks, the rules will be extended to around 37,000 other regulated firms as of September 2026, “increasing consistency across financial services.” A recent FCA survey revealed a 67% increase in reports of non-financial misconduct, rising from 4.2 incidents per 1,000 employees in 2021 to 7.2 in 2023.

FOS complaints surge amid motor finance row

City AM

Complaints to the Financial Ombudsman Service (FOS) have surged, with 305,726 recorded in the year to March 31, 2025. This is the highest total since the 388,392 seen in the year to March 2019, when the PPI scandal drove a spike in complaints. The latest increase comes amid the motor finance scandal, with the Supreme Court set to determine if banks unlawfully paid commissions to car dealers without customer consent later this year. Data shows that 73,328 complaints relating to motor finance were logged in the year to March 31. This marked a near-500% increase on the 12,604 recorded the year before. Complaints over irresponsible and unaffordable lending hit 71,685 in the period, with this up from 33,221 a year earlier. The report shows that 34% of complaints were upheld in the consumer’s favour, compared to 37% the year before, while the ombudsman’s caseload increased by more than 50%, year-on-year.

FINANCING
Financial advisers call for SME support

City AM

Financial advisers have voiced concern over a lack of support for small businesses in Government policy. A poll of advisers by alternative lender ThinCats saw more than half say Government policy is unsupportive of SMEs, while just 6% said it is supportive. The hike in employer National Insurance has put increased pressure on SMEs and the Federation of Small Businesses has warned that new workers’ rights rules, along with a higher minimum wage, could hit smaller firms and force them to reduce headcounts. Ravi Anand, managing director at ThinCats, said: “Given the UK has a bigger service-led industry, the NICs hikes and potential employment law changes have had a greater bearing.”

ECONOMY
Rate-setter calls for cuts

Reuters City AM

Bank of England policymaker Alan Taylor has urged fellow Monetary Policy Committee (MPC) members to vote for faster interest rate cuts in a bid to deliver a “soft landing” for Britain’s economy. He suggested that more cuts will help steer price growth down toward the Bank’s 2% target. The MPC voted to hold interest rates at 4.25% in June, with inflation having risen to 3.4%. Mr Taylor has voted to cut interest rates in five out of seven MPC meetings since he joined in September.

TECHNOLOGY
AI is reshaping the consultancy sector

City AM

Maria Ward-Brennan of City AM says the Big Four of Deloitte, EY, KPMG and PwC are cutting jobs and reducing graduate recruitment as they adapt to an AI-driven landscape. As competition intensifies, experts suggest that the Big Four must consider restructuring their consulting divisions to remain relevant. Tamzen Isacsson, CEO of the Management Consultancies Association, said: “AI is transforming consulting firms in profound ways,” indicating a shift towards specialised, tech-enabled roles. Ms Ward-Brennan says the consulting market is expected to become more fragmented, with smaller firms emerging as key players.

AND FINALLY …
Government urged to scrap the triple lock

City AM

The Institute for Fiscal Studies (IFS) has urged ministers to scrap the triple lock on the state pension, suggesting that employers should automatically contribute to private pensions. In a report co-produced with abrdn Financial Fairness Trust, the IFS notes research showing that one in five private sector employees – and 80% of self-employed workers – are not saving in a private pension. The think-tank says mandating that employers contribute to pension schemes worth 3% of workers’ pay would boost private saving by around £11bn a year. While the triple lock means the state pension increases by the highest out of inflation, wage growth or 2.5%, the IFS suggests that officials should peg the pension rate to inflation.


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