Mid-market private equity investment in London declined in the first half of this year, according to analysis by KPMG. Data shows that the volume of mid-market private equity investment in the City fell by 14%, with 168 deals completed. More than 50% of these deals involved a bolt-on, where a larger company acquires a smaller business in order to strengthen its operations. Across the UK, there were 377 mid-market deals in H1, with this down 11% on a year earlier. Deal volumes were down 17%, with 726 deals closed. Alex Hartley, head of corporate finance at KPMG UK said economic uncertainty, “driven by geopolitical events and nervousness around the impact of tariffs,” means the deals market has been “slightly more volatile” than had been forecast, with it taking longer to get deals over the line.

Activity in the UK’s construction industry contracted at the fastest rate since 2020 in July, according to S&P Global’s PMI for the construction sector. The report shows that output fell from 48.8 in June to 44.3 on an index where a reading below 50 points to contraction, with firms surveyed saying site delays, lower volumes of business orders and weaker consumer confidence have hit activity. Matt Swannell, chief economic adviser to the EY Item Club, said the data suggests the UK economy has “lost momentum.” Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, noted that the PMI “is erratic at the best of times,” adding that it has been “a relatively poor guide to real activity in the construction sector recently.”

Analysis of Companies House data shows that 3,790 company directors have left the UK since the Government set out a number of tax rises on the wealthy in the October Budget. This compares to 2,712 in the same period a year earlier. The Budget set out several measures that hit the wealthy, including a crackdown on non-doms, tighter inheritance tax reliefs and VAT on private school fees. Most of these came into effect in April and this coincided with a spike in departures, with 691 recorded that month. This was up 79% on April 2024 and 104% on April 2023. Official data on non-dom expatriation levels will not be released until 2027.

Canary Wharf has announced two new leasing agreements, bringing the total leased space this year to 250,000 sq ft. Banco Bilbao Vizcaya Argentaria (BBVA) will expand its office space to 60,000 sq ft at One Canada Water, extending its lease until 2035. SmartestEnergy will occupy 20,000 sq ft at 7 Westferry Circus. Despite a record 18.6% vacancy rate in the Docklands area, Canary Wharf remains attractive due to its connectivity.

With the National Institute of Economic and Social Research (NIESR) saying the Chancellor may have to break an election pledge and raise income tax, VAT or National Insurance to address a £50bn fiscal black hole, Sir Keir Starmer has refused to comment on whether taxes could be hiked. Asked whether he agreed with economists’ estimates on the need for tax rises or spending cuts, the Prime Minister said that “some of the figures that are being put out are not figures that I recognise.” NIESR analysts say Chancellor Rachel Reeves is set miss her borrowing target by £41.2bn and may also look to rebuild the £9.9bn fiscal headroom identified in the Spring Statement. Analysts at Capital Economics say Ms Reeves may have to raise as much as £25bn in taxes, while JPMorgan believes the Chancellor will look to raise around £10bn. Jason Hollands, managing director at Evelyn Partners, said it is likely that taxes are not coming down “any time soon.”

The Bank of England is expected to cut interest rates by 0.25 percentage points to 4%, marking the fifth reduction since August 2022. Experts say the Monetary Policy Committee (MPC) is likely to reduce the base rate by 0.25 percentage points in a bid to alleviate pressure on mortgage holders and home buyers amid a sluggish economy. Andrew Bailey, the Bank’s Governor, recently said that officials would be prepared to cut rates if the jobs market showed signs of weakening. Official data from the Office for National Statistics shows that the rate of UK unemployment increased to 4.7% in the three months to May, with this the highest level for four years. Matt Swannell, chief economic advisor to the EY Item Club, said a 0.25 percentage point cut is “almost certain,” while Sanjay Raja, senior economist for Deutsche Bank, said the economy has been “weaker than the MPC anticipated” since it published a Monetary Policy Report in May.

The government is considering a voucher scheme to provide small businesses with free HR advice as it prepares to implement its upcoming Employment Rights Bill. The legislation, which includes reforms on zero-hour contracts, flexible working, and sick pay, has raised concerns about added red tape and potential job cuts. A British Retail Consortium survey found over half of retailers expect to reduce staff, with seven in ten warning of negative business impacts.

Since the increase in employers’ National Insurance contributions (NICs) in April, the demand for self-employed contractors has surged. Figures from employment search engine Adzuna show that there are currently 326,068 contract jobs available, with this 20% up on early April. James Neave, head of data science at Adzuna, noted that employers are favouring contractors to avoid the additional £900 annual NICs for an average worker. The shift has resulted in a 9% drop in permanent roles, with 519,767 full-time vacancies now listed.

Former EY UK chair Hywel Ball has warned that the Big Four face challenges in AI adoption, including issues around cultural change, while mid-sized and boutique firms are more agile.

Deputy Prime Minister Angela Rayner has given China two weeks to explain why sections of its proposed London mega-embassy plans have been redacted. As the minister overseeing planning, Rayner is set to rule on the project by 9 September and has requested full transparency following concerns over the blacked-out areas.