Entrepreneurs in Britain are rapidly selling their companies ahead of a looming tax increase. According to Palladium Digital, requests for institutional investment have surged by 30% since the Budget announcement. Additionally, due diligence requests for company takeovers have risen by 20% in the last quarter. Business Asset Disposal Relief has risen from 10% to 14% and is due to rise to 18% in April. James Prebble, CEO of Palladium Digital, noted an “avalanche of deals” as entrepreneurs rush to complete transactions before the tax changes take effect. He suggested rising costs and bureaucratic challenges are driving US private equity firms to seek opportunities in the UK market.

Self-employed individuals in the UK are facing a daunting tax bill this January, potentially amounting to 150% of their previous year’s tax liability. The situation arises from the payments on account system, which requires them to pay their last year’s tax and an additional 50% towards the current year’s estimated tax. Sam Dewes from HW Fisher said: “In effect, self-employed workers pay 150% of the tax due for the previous year in one go. hereafter the payments smooth out. But this does mean the first year’s tax liability can be very scary.” Claire Thackaberry from the Low Income Tax Reform Group warned that new self-employed workers may struggle with these payments, especially if their earnings fluctuate.

Three-quarters of businesses oppose Chancellor Rachel Reeves’s £5bn tax on salary sacrifice schemes, according to a survey by the Confederation of British Industry (CBI). Under the old tax rules, there was no limit on the amount that someone could put into their work pension under salary sacrifice. Under the changes, due to come into force in 2029, such schemes will be capped at £2,000 a year. Louise Hellem, the CBI’s chief economist, warned: “People are already saving far too little for retirement,” highlighting potential long-term risks for future retirees. The survey also saw 73% of companies identify the National Insurance levy on private sector pensions as the most unpopular Budget measure. Additionally, 84% of firms doubt that the Budget will lower business costs, while 62% do not believe it will foster innovation.

As of 1 January, UK cryptocurrency buyers must disclose their account details to HMRC or face penalties. The initiative aims to ensure compliance with capital gains tax on crypto transactions. HMRC will collect data from cryptocurrency exchanges to recover unpaid taxes, potentially generating £300m over five years. Meanwhile, the Financial Conduct Authority is running public consultation until 12 February on other proposed crypto rules with the goal of having “a regime that protects consumers, supports innovation and promotes trust.”

Private equity firms are increasingly selling assets to themselves, with about 20% of all private equity sales in 2025 involving this tactic. This marks a rise from 12-13% in the previous year, according to Sinha Haldea, global head of private capital advisory at Raymond James. The strategy allows firms to return cash to older fund investors but raises concerns about conflicts of interest. Haldea predicts total sales will reach $107bn (£79.2bn) this year, up from $70bn in 2024. Investors worry about potential undervaluation of assets in these transactions.

The London Stock Exchange (LSE) recorded 11 new initial public offerings in 2025, marking its strongest year since 2021. The IPOs raised a total of £1.9bn, significantly up from £700m in 2024. A surge in activity during the final quarter contributed £1.3bn to this total. Notable listings included Princes Group, which raised £400m, and Shawbrook, which secured £348m. Vhernie Manickavasagar, UK’s IPO leader at PwC, commented: “London has delivered its strongest year for IPO and listing activity since 2021.” The momentum is expected to continue into 2026, he adds, “with a robust pipeline of large-cap IPOs expected across the consumer, financial services and TMT sectors.”

The Bank of England is expected to reduce interest rates from 3.75% to 2.75% by the end of the third quarter, according to Lombard Odier. Bill Papadakis from the Swiss bank stated that this decision is driven by a significant decline in job vacancies and a rising unemployment rate, which currently exceeds 5%. He noted: “Strong wage growth has already slowed meaningfully as the employment picture has weakened.”

Company incorporations have decreased by approximately 30% since new verification rules for directors and beneficial owners were introduced in November. Graham Barrow, a corporate filings expert, noted the legislation has had a significant impact, stating: “I expected a significant drop, and 30% or so is certainly that.” However, he warned that tactics to bypass scrutiny, such as using paid-for proxy directors, are on the rise. Barrow also highlighted issues with unverified addresses, calling for better verification measures. As of September, there were 5.5m companies on the register, with over 500,000 in dissolution.

Corporate insolvencies in the UK decreased by 8% in November 2025, totalling 1,866, down from 2,034 in October and 2,001 in November 2024. Jodie Wildridge, deputy chair of R3, noted that this decline, alongside a drop in inflation to 3.2% and a cut in interest rates to 3.75%, may provide cautious optimism for struggling businesses. However, insolvency levels remain high compared to five years ago, and the unemployment rate has reached 5.1%. “Sustained progress on inflation and employment will be key to restoring confidence in the long term,” Wildridge said.

Large UK companies were taken private at lower premiums in 2025, averaging 30% compared to 38% in 2024, according to Dealogic. Will Cain, Mergermarket’s head of analytics for Europe, noted that buyers struggle to find attractively priced targets amid high stock market valuations. Conversely, small cap companies saw higher premiums of 31%. Notable exceptions included Spectris and Alphawave, which received premiums of 105% and 96%, respectively. The decline in high-value deals raises concerns about London’s status as a global financial centre, especially as new listings remain scarce.

Britain’s labour market is facing significant challenges as redundancies rise and unemployment reaches 5.1%. Data from Indeed shows that job postings are down by almost a fifth comparted to pre-pandemic levels, with entry-level roles particularly affected and graduate roles down by 13% since 2024. While firms including Amazon, Microsoft and Salesforce cut hundreds of jobs in 2025, AI investment has increased. In London, financial firms like Barclays and Lloyds are experimenting with AI to assist with basic client queries and compliance checks, while US rivals JPMorgan and Goldman Sachs are utilising AI to assist with research and routine financial modelling. Looking at the market, Giles O’Halloran of Go2work says that “demand for lower-skilled, entry or commodity-type jobs is declining, whereas the demand for tech, digital and high-skilled roles will remain highly selective.”

The Times reports that mass company registrations at addresses are raising concerns over abuse of UK corporate structures, highlighting that 85,000 UK companies share 71-75 Shelton Street in London as their registered address. The UK’s financial crime risk assessment suggests there is “widespread abuse” of corporate structures for money laundering, with criminals “attempting to make their illegitimate funds appear to be part of normal business transactions.” While the National Crime Agency (NCA) estimates that money laundering comes in at over £100bn annually, Companies House acknowledges the scale is likely underestimated. A crackdown by agencies including the NCA has seen 11,500 firms struck off the Companies House register in the past year.

Britain’s investment levels have reached a new low, standing at just 18.6% of GDP for the three months to September, according to the Office for National Statistics (ONS). The figure is the lowest among G7 nations, even trailing behind Germany. Tera Allas, chairman of The Productivity Institute’s advisory board, commented: “If you asked me what the biggest economic problem in our country is, I would say it’s lack of investment.” The UK has struggled with policy uncertainty and a complex planning system, which have deterred significant business investments.

Recent findings from KPMG UK’s Consumer Pulse survey reveal that nearly 60% of Brits believe the economy is deteriorating, a significant rise from 43% earlier this year. Linda Ellett, head of consumer, retail and leisure at KPMG UK, commented: “A landscape of consumers adjusting to higher household essential outgoings…is set to continue into 2026.” The survey indicates that 81% of respondents cite rising grocery costs as a major concern. Economists predict subdued growth, with Capital Economics forecasting a 1.4% expansion in 2025, dropping to 1% in 2026.

Experts warn that 2026 is likely to be another sluggish year for the UK economy, with limited policies to stimulate private sector growth. Households and businesses faced challenges in 2025 due to tax hikes and the impact of US tariffs. Inflation rose to 4.9% by October, driven by increased food costs. Unemployment reached 5.1%, the highest in nearly a decade, as companies cut jobs in response to rising wage bills and the influence of artificial intelligence. Matt Swannell from EY Item Club commented: “Another year of sluggish growth for the UK economy is expected in 2026.”

A recent survey by Lloyds Bank reveals that 33% of British businesses plan to invest in AI in 2026, primarily to enhance productivity. However, more firms are prioritising staff training over technology investment, with 35% intending to increase training budgets. Paul Kempster, managing director at Lloyds Business & Commercial Banking, said: “These investment priorities will support businesses’ long-term growth.” The focus on skills comes after Rachel Reeves’ £1.5bn skills package aimed at addressing labour shortages in digital and AI roles. Despite the cautious approach, over half of businesses plan AI investments next year.

Mustafa Suleyman, CEO of Microsoft AI, has warned that artificial intelligence could become uncontrollable without proper regulation. Speaking on BBC Radio 4’s Today, he stated that fear regarding AI’s future is “healthy and necessary.” Suleyman predicted that advancements in AI over the next five years will be “outrageously exponential.” He stressed the need for a humanist superintelligence aligned with human interests, stating: “If we can’t control it, it isn’t going to be on our side.”

A government report reveals that 43% of businesses and 30% of charities experienced cybersecurity breaches in 2025. Notable victims include Marks and Spencer, Jaguar Land Rover, and Co-op Group. The report highlights that many firms lack effective incident response plans, leaving them vulnerable to ongoing threats and potential economic downturns. Jason Soroko, a cybersecurity expert, warned: “For cyber attacks, 2025 was brutal. 2026 will be worse.”