Construction sector faces bleak outlook

Business activity expectations in the UK construction industry have dropped to their lowest since late 2022, according to the latest Purchasing Managers Index (PMI) from S&P Global. The PMI recorded a construction output of 46.2, indicating a solid contraction as it remains below the 50.0 growth threshold. Tim Moore, economics director at S&P Global Market Intelligence, said: “Weak business optimism, shrinking workloads and robust cost pressures once again led to lower employment numbers across the construction sector.” Concerns about the UK economic outlook have led many clients to pause major projects ahead of the autumn Budget.

Labour’s profit crisis: SMEs struggle

Labour is facing a backlash from small and medium-sized enterprises (SMEs) as new polling reveals a significant decline in confidence. According to Opinium polling commissioned by Conservatives For Business, 59% of SME leaders lack confidence in the UK economy, and 51% report that profitability has worsened since the election. Many business owners feel neglected by Labour, with rising costs and taxes cited as major concerns. Writing in City AM, Danielle Dunfield-Prayero, chair of Conservatives For Business, stresses the need for lower energy costs and reduced business taxes to restore confidence and support SMEs.

UK steel industry warns of ‘biggest crisis’ due to new EU tariffs

Trade body UK Steel has warned that the industry is facing its “biggest crisis” in history as the EU prepares to reduce foreign steel quotas by almost half and charge importers a 50% tariff on goods that exceed the cap. The EU is attempting to protect its steel industry, which has lost 18,000 jobs last year, but the move poses a larger threat to UK industry than Donald Trump’s 25% levy as a far greater proportion of British steel is sold to Europe than to America.

Cabinet revolt over Budget tax rises amid wealth exodus

The UK cabinet is experiencing significant divisions over economic policy, particularly regarding tax measures targeting the wealthy. The Independent’s David Maddox reports that senior ministers have expressed alarm at the exodus of wealthy people following Labour’s non-dom changes and VAT on private school fees. “It’s doing a lot of harm to the country,” one minister said. Further measures targeting the rich reportedly being considered include a property tax on high-value homes and a new bank profits tax. The recent reshuffle saw left-wingers who support wealth taxes have been demoted or pushed out and now those on the right of the party are encouraging leadership to rein in spending and reform the state in a way that reflects Labour values.

Labour’s capital gains tax raid risks growth

Tax advisers warn that Labour’s proposed capital gains tax hikes could hinder growth and deter investment in the UK. Rachel Reeves and Keir Starmer aim to attract investment while facing pressure from left-wing members for a wealth tax. Experts from RSM and Quilter caution that increased capital gains tax rates may lead to longer asset holding periods, reducing short-term receipts. Chris Etherington from RSM commented: “You can quite easily end up shooting yourself in the foot financially.” The Institute of Economic Affairs also highlighted the negative behavioural effects of capital gains taxes on investment decisions.

Experts predict another raid on NICs

Chancellor Rachel Reeves is expected to implement significant changes to National Insurance Contributions (NICs) and income tax in the upcoming autumn Budget to address a £30bn fiscal gap. According to Oxford Economics, these changes could generate an additional £15bn in tax revenue. Proposed measures include extending the freeze on tax allowances, introducing new NICs on pension contributions, and broadening NICs rules to cover landlords and Limited Liability Partnerships.

Chancellor’s gambling tax will jeopardise jobs

Rachel Reeves faces criticism over a proposed tax increase on the gambling sector, potentially rising from 15% to 21%. Shadow sport minister Louie French condemned the plan, stating it could jeopardise jobs in horse racing and the wider industry. He noted that the sector contributes over £4bn in tax and supports around 109,000 jobs in the UK.

Tories pledge to scrap business rates

The Conservatives have pledged to abolish business rates for 250,000 small businesses, including pubs, restaurants, and high street retailers, if elected, promising 100% relief for firms paying £110,000 or less annually. Shadow Chancellor Sir Mel Stride framed the policy as vital for revitalising high streets, arguing that thriving local businesses support employment, community safety, and economic growth. The £4bn annual cost would be funded through planned spending cuts totaling £47bn, including welfare reforms, with councils fully compensated by central government. Labour has questioned how these savings would be delivered.

UK’s investment environment needs support – Bailey

Andrew Bailey, governor of the Bank of England, has stressed the need for a supportive investment environment to harness the economic potential of general purpose technologies (GPT) like AI and green energy. Speaking at Scotland’s Global Investment Summit, he stated that achieving industry-wide growth requires significant commitment. Bailey highlighted the importance of a policy framework that fosters innovation and allows for the gradual development of technologies. He also advocated for increased investment from UK pension funds and praised initiatives by the British Business Bank and Scottish National Investment Bank to support high-potential companies.

FCA launches crackdown on misleading motor finance claims

The Financial Conduct Authority (FCA) is collaborating with several regulators to address misleading claims by claims management companies (CMCs) in the motor finance sector. Paul Philip, chief executive of the Solicitors Regulation Authority, commented: “The risks and issues facing consumers in this area of the market are unprecedented.” The FCA’s redress scheme is projected to cost between £9bn and £18bn, though some industry experts believe this estimate may be inflated. The FCA’s consultation paper on the redress scheme is expected soon, providing further details on the industry’s response.

Fund managers urge BoE to halt debt sell-off

Fund managers are urging the Bank of England (BoE) to stop its debt sell-off, which they claim is worsening the UK’s fiscal situation. The BoE has been reducing its holdings of UK Government bonds, currently valued at £558bn, down from £875bn in 2022. Although the Bank has reduced its rate of sales from £100bn to £70bn over the next 12 months some want the central bank to stop the sales altogether arguing that it is only increasing long-term borrowing costs. The process is reportedly costing taxpayers £22bn annually, according to former BoE economist Carsten Jung.

Political turmoil sends French stocks tumbling

French assets faced a severe sell-off following the resignation of Prime Minister Sebastien Lecornu, just a month into his role. The political upheaval has exacerbated an ongoing crisis, pushing government borrowing costs to their highest since 2011. The yield on government bonds rose to 3.6%, while the Cac 40 index fell by 2% and the Cac Next 20 by nearly 3%. Kathleen Brooks, research director at XTB, noted: “Investors are offloading French assets on a broad basis.” The situation raises concerns about potential contagion and the future of Macron’s government.