The Government is set to introduce the Equality (Race and Disability) Bill, which will require employers with over 250 staff to disclose disability and ethnicity pay gaps. The Bill aims to establish a regulatory unit to prevent pay discrimination and may compel companies to create action plans for improving equality. The Black Equity Organisation has advocated for whistleblower protections to ensure transparency in pay gap reporting, saying support for those who flag issues is “essential.” The Trades Union Congress has called for mandatory pay gap reporting to be extended to employers with more than 50 staff, to cover lower-paid workers in smaller companies, insisting: “If the legislation is to be effective … it needs to apply to the majority of workplaces.” Equalities Minister Seema Malhotra says the measures set out in the Bill are part of the Government’s “absolute” commitment to DEI.

Office for National Statistics (ONS) data shows that the UK economy shrank in May, contracting by 0.1%. This follows a 0.3% contraction in April and was driven by a drop in manufacturing and “very weak” retail sales. With May’s figures logged, the economy is now forecast to come in at around 0.1%-0.2% for the April to June period. Hailey Low, associate economist National Institute of Economic and Social Research, said the economy shrinking for two consecutive months suggests that the outlook for growth “remains fragile.” Chancellor Rachel Reeves described the ONS figures as “disappointing,” adding that she is “determined to kickstart economic growth.” Shadow Chancellor Mel Stride said the shrinking economy was the result of Labour’s “reckless choices,” while Shadow Business Secretary Andrew Griffith called on ministers to reverse an “onslaught of tax and regulations” that have hit businesses. Suren Thiru of the ICAEW said: “May’s downbeat outturn means a contraction in GDP across the second quarter looks a racing certainty,” while EY Item Club economist Matt Swannell said it was “all but certain” that GDP would contract overall between April and June. Barret Kupelian, chief economist at PwC, warned that the UK’s economic outlook was “beginning to turn sour.”

UK manufacturing output has surpassed pre-pandemic levels for the first time, driven by a surge in aerospace and defence orders. The report from Make UK and BDO – which covers output to the end of 2023 – also shows the number of manufacturing jobs increased by 12,000 in the 12 months to March 2024, bringing the sector’s total to just under 2.6m. Fhaheen Khan, senior economist at Make UK, said: “Hopefully the post-Covid malaise is firmly in the rear-view mirror,” but cautioned that growth must be evenly distributed across regions. Despite a climb in output, the report also noted a decline in goods exports to the EU. The South West was the strongest performing region, with data showing that it was running at 27% above 2019 levels. This was followed by the East of England, at 21%, and the North West, which is up by a fifth.

More small businesses expect to downsize or close than grow over the next 12 months, according to a survey by the Federation of Small Businesses (FSB). The poll found that 27% of small business owners in the UK expect to downsize, sell, or close their businesses while just 25% anticipate growth over the next year. The analysis means that sentiment is at the lowest point since the annual survey was launched in 2008. Warning that small firms are “facing a very dangerous situation,” FSB policy chair Tina McKenzie said: “Confidence being so low, and not showing any improvement since the start of the year, is bad enough. Stagnation and pessimism among small businesses spells huge risk for the overall economy.”

The labour market is experiencing a significant slowdown, with the supply of available workers increasing at the fastest rate in nearly five years. According to analysis by KPMG and the Recruitment and Employment Confederation (REC), there has been a decline in permanent vacancies and reduced demand for employees. Consequently, wage growth in the private sector has slowed from 5.5% to 5.3%, marking the slowest pace in four months. Neil Carberry, chief executive of the REC, noted that companies are hesitant to hire due to “the scar tissue left by the spring tax hikes and fear of further business tax rises.” Jon Holt, group chief executive and UK senior partner at KPMG, said the threat of rising employment costs is contributing to a “wait and see” approach among employers. Official jobs market figures show unemployment rose to a four-year high of 4.6% in the three months to April, up from 4.5% in the previous three months.

The UK job market is facing significant challenges, with unemployment rising to 4.6% in Q2 from 4.4% at the start of 2025 and HMRC data showing that 276,000 jobs have been lost since October’s Budget. While there are concerns about AI contributing to job losses, economists have suggested that cuts are primarily due to factors such as rising employment costs, monetary tightening, and a broader economic slowdown. With experts pointing to opportunities for job creation through AI, it is noted that the Government has invested £44bn in AI initiatives that have reportedly created 13,250 jobs in the past year. Yael Selfin, chief economist at KPMG, said: “When you look at any technology, it creates jobs – not just destroys them.”

Entry-level job vacancies in the UK have dropped to their lowest level since 2018, with the number of graduate jobs advertised by employers having fallen by 33% this year. According to recruitment platform Adzuna, UK graduates faced an average of 140 applications per job in 2024, while data shows that entry-level roles at Big Four accountancy firms are down 11%-29% this year. AI is believed to have played a part, with technology capable of repetitive admin tasks usually handed to new-starters, and a poll by Prospects shows that 1 in 10 British students have switched degrees to pre-empt AI. While some blame AI for the decline in entry-level roles, Carl-Benedikt Frey from the Oxford Martin School suggests that inflation and economic uncertainty are more significant factors.

Angela Rayner’s proposed employment law reforms, which aim to expand workers’ rights – including easier strike action and protections from unfair dismissal – have been criticised by the Institute of Economic Affairs (IEA) as a £5bn “stealth payroll tax” on workers. The IEA argues the increased costs for businesses will be passed on through lower wage growth. Business groups and the Conservatives warn the reforms will harm investment, employment, and productivity. The Office for Budget Responsibility also anticipates a “probably net negative” economic impact on areas including employment, prices, and productivity.

Chancellor Rachel Reeves is planning a £1.7bn business rates overhaul in the autumn Budget to help fill a £5bn hole in public finances. The proposal involves raising business rates on large retail premises – such as department stores and supermarkets – to fund lower rates for smaller retailers, hospitality, and leisure businesses. Ministers say the effective discount will target online retailers and save independent firms. Larger retailers, including M&S, Asda, Morrisons, Primark, Sainsbury’s, Tesco and B&Q owner Kingfisher, have strongly opposed the move, warning that it will accelerate high street decline, increase prices, and cause widespread job losses. While the Treasury claims only 1% of properties will be affected and that the changes will support smaller firms, Shadow Business Secretary Andrew Griffith warned that the “stealth tax is going to force up prices and lead to more shop closures.”

Transport Secretary Heidi Alexander has refused to rule out tax rises in the Budget, although she insists the Government will not hike them for those on “modest incomes.” Speaking on Sky News’s Sunday Morning with Trevor Phillips, she said: “We made a commitment in our manifesto not to be putting up taxes on people on modest incomes, working people. We have stuck to that.” Ms Alexander went on to say that “when it comes to taxation, fairness is going to be our guiding principle.” She also revealed that cabinet ministers did not “directly” talk about the idea of a wealth tax during a recent away day at Chequers. Her comments come at the end of a week that saw Prime Minister Sir Keir Starmer reiterate that Labour would avoid increases to income tax, VAT and National Insurance, but also fail to rule out extending the freeze on income tax thresholds.

Documents obtained under the Freedom of Information Act indicate that HMRC provided substantial 85% discounts to large companies involved in the loan charge scandal, while independent contractors faced large tax bills. Conservative MP Greg Smith revealed the details in Parliament, describing the situation as “staggering,” while Liberal Democrat MP Sarah Olney said: “It is unacceptable that victims have been consistently refused the justice they deserve while large companies received settlements a decade ago.” The loan charge, introduced in 2017, has left 50,000 self-employed workers with significant tax liabilities.

London has been named one of the world’s leading hubs for tech talent, coming second to San Francisco in a ranking by Colliers. The report assessed more than 200 global cities on factors such as AI hiring, venture capital flows, university output and tech productivity. The capital scored highly across all categories and Andrew Hallissey, global chief of occupier services at Colliers, said: “Location strategies are shifting. London’s advantage lies in the scale of its ecosystem – talent, innovation and investment all converge here.”

Rachel Reeves is set to announce a significant reduction in banking regulations, with plans to scrap parts of the senior managers and certification regime which certifies almost 140,000 financial services professionals. The Chancellor last year said that while the senior managers certification regime had “helped to improve standards and accountability, some elements … have become overly costly and administratively burdensome.” Ms Reeves is expected to make it easier to appoint senior managers by reducing engagement with regulators and removing the need for “pre-approvals” for around four in ten applications. In her upcoming Mansion House speech, the Chancellor will encourage financial firms to relocate to the UK and warn that “for too long red tape has choked off innovation and growth.” A Treasury source said the Chancellor is determined to make the UK the premier destination for business, promising to “turbocharge growth” for future generations.

Chancellor Rachel Reeves is expected to launch a “concierge service” for wealthy individuals as ministers look to encourage greater investment into the UK, especially into high-growth sectors detailed in the Government’s industrial strategy. The service, which will be part of the new Office for Investment, is set to provide foreign investors with advice on visas, regulation and other potential barriers to entry. The City of London Corporation has urged the Treasury to create an investment hub, saying the move could unlock up to £10bn in capital by making it easier for firms to identify growth opportunities and navigate regulations.