The number of UK businesses in ‘critical’ financial distress rose 78% year-on-year, reaching 55,530 in the third quarter, according to the Red Flag Alert report from Begbies Traynor. Economic uncertainty and inflation have heavily impacted firms, with 21 out of 22 sectors covered in the analysis reporting significant distress. London accounts for the highest number of critically distressed firms, with 19,323. The report shows that those in “significant” financial distress increased nearly 15% year-on-year, to 726,594 firms compared to 632,756 in Q3 2024. Julie Palmer, a partner at Begbies Traynor, said: “Unfortunately for UK businesses, inflation is going nowhere, putting further pressure on companies at a time when wage, tax, and financing costs are already high.” Ric Traynor, executive chairman of Begbies Traynor, said: “With confidence and investment both subdued, the challenges for businesses remain substantial.” The number of corporate insolvencies increased by 2% year-on-year to 2,000 in September, according to the Insolvency Service, with the number of company administrations down by 17% to 124.

Paul Scully, a former Minister for London, warns that the UK’s listing rules are driving British companies away. He voices concern that the Financial Conduct Authority’s current regulations create a disadvantage for UK firms, pushing them towards overseas listings. Mr Scully argues that this could cost the UK billions in tax revenue and urges reforms to support British companies. He says: “We cannot stand by while our own rules push British companies abroad.” Noting that the US Securities and Exchange Commission is consulting on rule changes to “halt regulatory arbitrage” by offshore companies, “potentially requiring dual listings on major exchanges outside the US that provide ‘meaningful regulation and oversight’,” he suggests that London is “perfectly positioned to benefit, but only if we fix our rules to allow British companies the same flexibility we offer to foreign firms.”

Proposed reforms of the business rates system could severely impact small businesses and flexible workspaces, with it argued that the removal of Small Business Rates Relief (SBRR) and vacant office relief may lead to increased occupancy costs for tenants. This change would treat flexible offices as a single property, disqualifying many small firms from SBRR. Operators would face higher costs, risking their ability to provide affordable spaces.

The Office for Budget Responsibility’s downgraded productivity forecasts have left the Chancellor with limited options as she looks to address a £22bn gap in the public finances as the Budget nears. Rachel Reeves is reportedly contemplating an increase in income tax, despite previous assurances that income tax, VAT and National Insurance would not be increased. A 2% increase in income tax would reportedly see National Insurance reduced by the same rate. Raising the basic rate by 1p would raise over £8bn a year by 2028/29, according to HMRC figures, while adding 1p to higher rate tax to make it 41p would raise £1.2bn and increasing the 45p rate to 46p one would only raise £230m. Alex Race, a chartered financial planner at Rathbones, notes the possible impact of the freeze on tax thresholds, saying: “A 1p hike in income tax might seem modest at face value, but its impact is amplified by the scourge of fiscal drag.” The Institute for Fiscal Studies has warned that not raising income tax, National Insurance, or VAT would have “particularly damaging effects,” while business groups, including the Institute of Directors, other think-tanks and City analysts, agree that raising income tax would have the least damaging implications for growth.

Nearly half of business owners plan to reduce their headcount due to the £25bn National Insurance contributions (NICs) hike. A survey by S&W shows that 28% of firms may cut jobs unless ministers deliver tax cuts or other forms of relief for employers hiring more workers. While 19% said they would reduce staff even if measures were introduced, a further 19% said they had already reduced headcounts due to the rise in NICs. The Office for National Statistics estimates that 100,000 jobs have been lost since the employer National Insurance rate was increase, while the unemployment rate has risen from 4.4% to 4.8%. Bank of England policymakers say that the increase has driven up inflation. Claire Burden, head of consulting at S&W, stated: “This is a crunch point for UK businesses. Employers are urging the Government for tax breaks to prevent further job losses.”

Thousands of working pensioners have been pulled into the 60% income tax trap as frozen thresholds push more people into higher tax brackets. Analysis by Interactive Investor shows that 77,000 pensioners paid the 60% rate in the most recent tax year, more than double the 34,000 affected three years ago and a 13% increase from the 68,000 recorded in 2023/24. The tax applies to individuals earning over £100,000, a threshold that has remained unchanged since its introduction in 2010. Experts say that if the threshold had kept pace with inflation, it would now stand at about £155,000. With the freeze on income tax bands expected to last until at least 2028/29, even more pensioners are likely to face punitive rates.

Rachel Reeves is contemplating the removal of the windfall tax on North Sea oil and gas in her upcoming Budget. The Energy Profits Levy was introduced in 2022 and the Chancellor increased the rate by 3% and extended the levy until at least 2030 in last October’s Budget. Ms Reeves is reportedly seeking assurances from oil and gas companies that scrapping the levy would result in new investment and jobs. David Whitehouse, chief executive of industry body Offshore Energies UK, said: “The windfall tax is costing jobs and investment and reducing the tax revenues that support families, communities and vital services across the UK.”

The Times‘ Emma Duncan warns that firms are “struggling under proliferating layers of regulation,” highlighting that the National Procurement Policy Statement requires companies that win contracts to provide “social value.” She argues that these “are more than vague aspirations,” noting that when the Government decides which companies get contracts, 10% of the weighting is given to social value. Ms Duncan writes that politicians “think it’s fine to get companies to pay the costs of legislation or regulation,” but warns that if ministers want to foster growth, they “must stop piling costs on to companies.”

Ministers are intensifying efforts to enhance national cyber resilience as cybercrime escalates. The Government is launching a Cyber Security and Resilience Bill to mandate reporting of attacks and strengthen supply chain defences, linking cyber resilience to economic growth and national security. The National Cyber Security Centre reported 204 significant cyber incidents in the year to August 2025, a rise from 89 the previous year. Of these, 18 were classified as “highly significant”, representing threats capable of seriously affecting sensitive data, or key government functions. Officials have flagged the economic impact of such incidents, with a breach at Jaguar Land Rover costing the UK £1.9bn. Ciaran Martin, former head of the NCSC, described the breach as “by some distance, the single most financially damaging cyber event ever to hit the UK.”

The Scottish Government is facing a £5bn funding gap by 2029/30, according to Auditor General Stephen Boyle. Mr Boyle highlighted ongoing pressures, including rising social security costs and workforce expenses, and said that the government must develop detailed plans to address the projected shortfall. The Government’s total expenditure for 2024/25 is £56.3bn, £1bn less than the budget.

Just 25% of the global workforce are happy in their jobs, according to the 2025 Mental Health in the Workplace poll by jobs platform Monster. The study reveals that 80% of UK workers feel they are in a “toxic environment,” with British workers found to be the unhappiest employees in the G20.