Tax experts have warned MPs that the current tax system is overly complex and inhibiting growth, telling the Commons Treasury Committee that Chancellor Rachel Reeves should use her Budget to overhaul taxation. On the Chancellor’s options, Dan Neidle, founder of Tax Policy Associates, suggests Ms Reeves could raise “one of the main taxes” – even though this would betray a manifesto pledge that income tax, National Insurance and VAT would not be increased. Mr Neidle added: “The less wise way to do it is by picking from a Scrabble bag of lots of little individual tax rises.” He also says he wants to see the Chancellor think about ways to “reform the tax system to be pro-growth,” warning: “I think it’s become quite desperate.” Ruth Curtice, chief executive of the Resolution Foundation think-tank, also suggested that tax hikes are needed to balance the books, saying: “When you look at the cost of borrowing for the UK relative to other countries, it’s one of the highest of rich countries. And the position that we face, there is a strong case for raising taxes at this Budget.”

Chancellor Rachel Reeves has been urged to scrap business rates in the Budget, with it suggested that the charge should be replaced with a new tax on profits. Alex Altmann, a partner at Lubbock Fine, said many firms see business rates as “overly complex and too expensive,” and warns that the levy is “a disincentive to expand and grow a business in the UK.” Calling for reform, he argues that the current system “piles pressure” on new businesses and inward investors by taxing them before they are profitable.  Business rates, he said, “need a complete overhaul – a replacement, rather than tinkering.”

The tax burden on British banks is increasing, according to a report by UK Finance. The total tax rate for London-based banks has reached 46.4%, with this significantly higher than the 27.9% rate for their New York counterparts. This disparity raises concerns about the UK’s competitiveness in the global financial market. The report, produced in conjunction with PwC, suggests that removing bank-specific taxes – the Bank Levy and a 3% corporation tax surcharge – could lower the rate to 40%. In a letter to Chancellor Rachel Reeves, David Postings, UK Finance’s chief executive, warned that “uncertainty and speculation” around potential tax increases have “caused negative market reaction which is harmful to the UK’s ability to attract international investment.”

Analysts from broker Shore Capital have criticised the Treasury for its inability to foster economic growth as the UK prepares for a tax-raising Budget. Clive Black and David Hughes described the Government as “detached, ignorant, and selfish,” adding that the Treasury is “incapable of either creating the conditions for private capital to flourish or controlling Government expenditure, making for a never-ending debate on what taxes to increase.” The analysts also noted the pressure increases to National Insurance contributions and the National Living Wage are placing on employers.

Public sector pay has significantly outpaced private sector earnings, with year-on-year growth at 6% compared to 4.4%, according to the Office for National Statistics (ONS). Andrew Wishart, senior UK economist at Berenberg, noted that public sector pay growth, including bonuses, is driving overall wage increases. Average wage growth was 4.7% in the three months to August, the ONS data shows, with this down from 4.8% over the three months to July. Neil Carberry from the Recruitment and Employment Confederation warned that the widening pay gap is unsustainable and exacerbated by a hike in National Insurance contributions that has hit private sector employers. On gaps between the sectors, Jake Finney, senior economist at PwC UK, notes that “strong public sector hiring… continues to mask a far weaker picture in the private sector.”

The UK unemployment rate has risen to 4.8%, the highest since May 2021. Data from the Office for National Statistics (ONS) shows that 1.737m people were logged as unemployed in the June to August quarter, with this an increase of more than 60,000 since the previous three month period and the highest total since the November 2020 to January 2021 quarter. Overall, payroll employment fell by 93,000 in the year to August, while vacancies decreased by 9,000 to 717,000 in the July to September quarter. Professor Joe Nellis, economic adviser at MHA, commented: “Hiring momentum has slowed across most sectors, with many employers holding off on new recruitment or scaling back hours instead of making redundancies.”

Apprenticeship offers are increasing as graduate vacancies decline, according to the Institute of Student Employers. Graduate hiring fell by 8% last year, while apprentice hiring rose by 8%. Despite rising competition for roles, starting salaries for graduates remain at £33,000, while school leavers earn £24,000. A recent Grant Thornton survey found that 44% of parents now prefer school leaver apprenticeships over university.

The International Monetary Fund (IMF) projects the UK will be the second-fastest growing advanced economy this year and next, with a growth rate of 1.3% for 2025 and 2026. This growth outpaces all other G7 nations, except the US. However, UK inflation is expected to rise to the highest in the G7 by 2025, driven by increased energy costs. While UK inflation is forecast to average 3.4% this year and 2.5% in 2026, the IMF says this will be “temporary” and predicts a fall to 2% by the end of next year. Chancellor Rachel Reeves welcomed the IMF’s updated forecast for the UK’s economy but noted that “for too many people, our economy feels stuck.” She added: “Working people feel it every day, experts talk about it, and I am going to deal with it.” Shadow Chancellor Sir Mel Stride said the IMF report made for “grim reading,” arguing that UK households are “being squeezed from all sides.”

Research from Cisco shows that only 16% of UK firms are prepared to scale AI effectively. While 82% of firms plan to deploy AI agents soon, less than one-third feel equipped to handle AI-specific security threats. The review highlights a significant divide between advanced companies and those hindered by outdated systems and security issues. A separate poll of executives in the financial sector for Forvis Mazars found that while all respondents claimed to be AI-ready, only 43% of firms have a well-developed AI strategy.

Essex County Council has reported promising results from trials of a new graphene-enhanced asphalt on the A1016 in Chelmsford, marking the first use of the material by a UK local authority. Tests by pavement specialists found the reinforced surface performed 10% better in stiffness and 20% better in water resistance than standard asphalt, suggesting greater durability under traffic and weather conditions. Although the material costs £2.50 more per square metre to lay, its potential to reduce long-term maintenance and associated carbon emissions has drawn interest from National Highways, which is now trialling it on the A12.