Financial services in the UK are experiencing a significant downturn, according to the Confederation of British Industry (CBI). Business volumes fell from -36% to -38% in late 2025, reflecting declining profitability and confidence. CBI chief economist Louise Hellem noted a “gloomy end to 2025” but expressed cautious optimism for early 2026, citing recent Budget decisions as positive steps. Firms are expected to invest in technology to improve productivity, while industry executives anticipate a rise in IPOs on the London Stock Exchange. Hellem said: “The Government must now focus on delivery to unlock investment.”

The Chancellor is set to reverse the business rates hike affecting pubs following significant backlash from landlords, who threatened protests against the tax increases. The Government is considering changes to how business rates are calculated and may also adjust licensing rules. Emma McClarkin, CEO of the British Beer and Pub Association, said: “This could save locals, jobs, and means publicans can breathe a huge sigh of relief.” However, the proposed relief may not extend to the whole hospitality industry. Kate Shoesmith at the British Chambers of Commerce said: “While news of a carve out for pubs is welcome, there are many other smaller hospitality companies facing an existential threat.” The U-turn comes ahead of a vote on Rachel Reeves’s Finance Bill on Monday, with Labour’s backbenchers threatening a revolt after many were banned from their local pubs.

The UK Government has confirmed that there will be no further changes to the recently adjusted inheritance tax plans for agricultural assets. Environment Secretary Emma Reynolds told the Oxford farming conference that the threshold for the 20% tax will rise from £1m to £2.5m, effective in April, but no more changes would be made. Critics view this as a partial climbdown after protests against the original proposal. CLA president Gavin Lane called the Government’s adjustments a “welcome relief” but still damaging. The National Farmers’ Union remains opposed to the tax and seeks further changes. Tom Bradshaw, the NFU president, said: “The Government has got to make farmers and rural communities feel valued, and at the moment farmers don’t know where the goalposts are. Does domestic food production matter to the Government or not?”

Over 800,000 landlords and self-employed individuals are at risk due to new tax obligations starting this April. The changes, part of the Making Tax Digital (MTD) programme, will affect those with rental income or self-employment earnings exceeding £50,000. Simon Armstrong from Menzies stated: “There’s a real lack of awareness of MTD obligations.” Many business owners are unprepared, and Claire Roberts from Moore Kingston Smith warned that many will scramble to comply before the deadline. HMRC aims to assist businesses in adapting to these changes, but concerns about technical readiness remain.

New proposals from the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) aim to enhance transparency in pension schemes. The changes require schemes to disclose performance data, costs, and service quality. If a scheme is deemed poor value, firms must either improve it or transfer savers to better options. The new “traffic light” system will help identify scheme performance, with red or amber scores prompting necessary improvements or member transfers. Nausicaa Delfas, TPR chief executive, said: “Millions of people rely on pension income…We have to make sure they get value for their money.” The proposals also address the need for long-term value and clearer expectations for trustees and providers.

UK accounting bodies are opposing a government proposal to transfer anti-money laundering oversight to the Financial Conduct Authority (FCA). They argue this shift will diminish sector-specific expertise and exacerbate economic crime. The Association of Chartered Certified Accountants stated that the FCA would require years to develop the necessary knowledge. The Institute of Chartered Accountants in England and Wales echoed these concerns, warning that the changes could hinder industry growth and create regulatory confusion.

The UK Treasury lacks awareness of risks associated with the expanding shadow banking sector, according to a report by the Lords financial services regulation committee. The report highlights a “limited grasp” of concerns, suggesting a passive approach to potential threats to financial stability. The unregulated sector, valued at $16tn, includes private equity and credit firms, which are intertwined with traditional banks. Michael Forsyth, committee chair, stressed the need for vigilance in monitoring the sector’s growth.

The UK fintech sector attracted £2.7bn in investment last year, maintaining its position as Europe’s second-largest market. According to Innovate Finance, this figure surpasses the combined total of the next five European countries. The second half of 2025 saw an 11% increase in investment, with notable deals including FNZ’s $650m raise. Janine Hirt, CEO of Innovate Finance, commented: “The UK has once again proven its credentials as a world-leading financial innovation and technology hub.” However, she warned that regulatory reforms are essential to sustain this lead amid rising competition.

UK house prices fell to their lowest level in six months in December, down 0.6% to £297,755, according to Halifax. Annual growth slowed to 0.3%, a significant drop from 3.2% in December 2024. Amanda Bryden, head of mortgages at Halifax, said: “While this may feel like a subdued close to the housing market in 2025, overall activity levels were resilient.” Despite recent interest rate cuts, Bryden anticipates a modest rise in house prices of 1% to 3% in 2026, although challenges like wage inflation and employment rates may impact buying power.