Businesses are delaying hiring as they await clarity on Government tax and spending plans, according to a survey by the Recruitment and Employment Confederation (REC) and KPMG. The REC-KPMG permanent hiring index rose slightly to 45.2 in October, with this below the 50-point mark that separates growth from contraction. The temporary hiring index, however, rose to 50.2. Permanent appointments fell in October, albeit at the slowest pace since July 2024. The report suggests that demand for workers has been hindered by higher employment costs stemming from the hike in employer National Insurance contributions announced in last year’s Budget.

The Government has reversed its decision to raise income tax, with a source saying that Prime Minister Keir Starmer and Chancellor Rachel Reeves decided against the tax increase after a series of intense briefings and amid concern over the response from voters. Instead, they may consider smaller tax-raising measures to address a shortfall in the public finances that could be as high as £30bn. The U-turn on the tax hike has been submitted to the Office for Budget Responsibility. Ms Reeves had previously informed the budget watchdog of plans to raise income tax, a move that would have broken a manifesto pledge that Labour would not increase income tax, National Insurance or VAT. It has been suggested that the Chancellor could instead cut the thresholds at which different rates of income tax are paid while leaving the basic and higher rates unchanged.

The number of higher-rate income taxpayers in the UK is set to exceed 10m for the first time, according to the Institute for Fiscal Studies (IFS). Chancellor Rachel Reeves is expected to extend the freeze on income tax thresholds until 2030, a move that would drag an additional 790,000 workers into the 40% tax bracket. The IFS said an extension would bring the total number of higher-rate taxpayers to 10.1m. This would mark an increase of 4.8m compared to if thresholds had never been frozen. While the 40% tax bracket was paid by just 3.5% of adults in the early 1990s, it is on course to reach 14% by 2027/28. Matthew Oulton, an economist at the IFS, described the freeze as a “huge tax rise” that would increase tax on all employees working full-time, most working part-time, most minimum wage workers and many low-income pensioners. The freeze could also mean that 42m people will face an income tax bill by 2029, with this up from 31.7m before thresholds were locked in 2021.

Rachel Reeves has abandoned plans for a tax raid on limited liability partnerships after Treasury modelling indicated it would cost more than it would raise. The Chancellor was reportedly considering the introduction of a charge of about 7% in the upcoming Budget. However, Treasury analysis suggested that partnerships would bring forward profits to avoid the new charge before its introduction, resulting in a spike in income tax revenues in the short term but a £400m reduction in revenues in 2029/30. Leaders from Britain’s professional services sector had warned Ms Reeves that imposing employers’ National Insurance on LLPs would “stunt growth” and create instability. Prominent trade body leaders including the chief executive of the ICAEW and the president of The Law Society, said higher taxes on LLPs “would be a misstep.” They argued that the additional burden risked creating “a perfect storm” that would stifle investment, hiring, and innovation.

Rachel Reeves, the Chancellor, has abandoned plans for an “exit tax” on wealthy individuals due to concerns it could lead to a mass departure of millionaires from the UK. The proposed levy aimed to tax entrepreneurs selling assets before leaving the country. A source close to the Chancellor stated: “This is a pro-business Government… Introducing an exit charge would risk signalling that the UK is less welcoming.” The decision follows warnings from business leaders that such a tax would deter innovation and investment in the UK.

Barry MacLeod, chief executive of Flotation Energy, has warned that the windfall tax on oil and gas is causing the loss of 1,000 jobs each month in the UK’s North Sea. He has urged Chancellor Rachel Reeves to reconsider the tax, emphasising the importance of retaining skilled workers for the transition to renewable energy.

The UK economy grew by 0.1% in the third quarter, data from the Office for National Statistics (ONS) shows. The service sector drove this modest growth, while the production sector, particularly manufacturing, contracted. Analysts had anticipated growth of 0.2% for the quarter, while the Bank of England had predicted a 0.3% increase. The ONS data shows that the economy contracted by 0.1%, month-on-month, in September. The decline was attributed to a significant drop in car production due to a cyber-attack on Jaguar Land Rover. James Smith, research director at the Resolution Foundation think-tank, said: “This latest slowdown shows the scale of the challenge facing the Government as it seeks to kickstart growth.” Ruth Gregory, deputy chief UK economist at Capital Economics, commented: “The big picture is that the economy is struggling to gain decent momentum in the face of higher taxes and soft overseas activity.”

The Bank of England is likely to cut interest rates in December after the economy grew by just 0.1% in the third quarter. RSM UK economist Thomas Pugh said the data makes a rate cut “almost certain,” while Suren Thiru of the ICAEW said the “disappointing figures pave the way for a December interest rate cut by fuelling fears over economic conditions sufficiently to push a majority of rate-setters to authorise another policy loosening.”

The Conservatives have proposed scrapping diversity targets for City firms in a move to reduce unnecessary red tape. Shadow Chancellor Mel Stride announced plans to ban the Financial Conduct Authority (FCA) and Prudential Regulation Authority from introducing or maintaining “non-financial” rules – such as those on diversity – without ministerial approval. The Tories argue this will cut compliance costs and help the UK compete globally, declaring an aim to streamline the regulatory environment for financial institutions. Existing diversity and inclusion requirements for major banks and insurers, including FCA targets for women and ethnic minority representation on boards, would be repealed. Mr Stride said: “We will ensure that regulation is focused on the core financial objectives.”

The National Wealth Fund (NWF) has come under scrutiny following an audit that identified significant weaknesses in its risk controls. The National Audit Office’s report highlighted five areas of risk, including potential failures in the effectiveness of risk, management, governance and internal controls. Bridget Rosewell, chair of the NWF Audit and Risk Committee, noted delays in adopting a long-term investment management system. Despite reporting a loss of £152.2m before tax, the NWF said that losses were anticipated during its growth phase. Treasury Committee chair Meg Hillier last month said MPs “remain to be convinced” whether the NWF will “meaningfully shift the dial on economic growth.” An NWF spokesperson claimed no material risks emerged from the audit.

UK Finance figures show home repossessions rose sharply in Q3 2025, but mortgage arrears fell. There were 1,390 homeowner repossessions, up 51% annually, and 900 buy-to-let repossessions, up 29%. Despite this, levels remain close to pre-pandemic norms and well below long-term averages, with most cases linked to older mortgages. Arrears dropped to 84,100 homeowner and 10,420 buy-to-let mortgages, reflecting improved stability and lender support. Experts welcome the fall in arrears but warn rising repossessions show ongoing financial pressure, urging borrowers to seek help early.