UK manufacturing is experiencing growth, with the purchasing managers’ index (PMI) from S&P Global rising to 51.8 in January, marking a 17-month high. However, this recovery has not translated into job creation, as firms continued to cut staff for the 15th consecutive month. Experts warn that rising costs, including electricity prices and National Insurance hikes, are forcing manufacturers to reduce headcount despite increased production driven by export demand. Matt Swannell, chief economic advisor to the EY Item Club, said the positive overall reading for the PMI “should be taken with a heavy pinch of salt,” warning that it is “likely that 2026 will be another subdued year for UK manufacturers as fiscal policy continues to tighten, households’ real income growth is set to slow, and international trade policy uncertainty remains elevated.” Mike Thornton, head of industrials at RSM UK, notes that manufacturers are also braced for the introduction of a new carbon border tax in 2027.

High energy costs in the UK are discouraging American investment, according to Prime Minister Sir Keir Starmer’s adviser on trade and investment, Varun Chandra. At a BritishAmerican Business conference, executives from US firms highlighted that the UK’s expensive power and high taxes undermine its competitiveness. Jennifer Bachus from the US embassy urged the UK Government to exploit North Sea oil and gas to reduce costs.

Data from Nationwide shows that UK house prices increased by 0.3% in January, with the average home now costing £270,873. This marks a 1% increase on January 2025. The uptick follows a sluggish end to 2025, with uncertainty ahead November’s Budget dampening activity. Buyer demand has since rebounded, with Zoopla data showing enquiries back in line with 2024 levels.

New analysis reveals that the tax threshold freeze will disproportionately affect middle-income earners, hitting workers earning £48,000 a year harder than those on £150,000. Research from the Institute for Fiscal Studies indicates that those earning £48,000 will pay an additional £603.50 by 2031, while those on £150,000 will only pay £393.59 more. Chancellor Rachel Reeves confirmed the freeze will last until 2031, pushing millions into higher tax brackets. Shadow Chancellor Sir Mel Stride criticised the move, said: “The biggest tax rise in her Budget was a stealth tax which hits middle earners the hardest.” Experts predict 5.2m low earners will enter the tax system due to the freeze, while 4.8m middle earners will pay the 40p tax rate which was designed for the wealthy.

The Bank of England’s deputy governor for financial stability, Sarah Breeden, has urged the UK to enhance its payments infrastructure to keep pace with global innovations. Ms Breeden says that while the UK pioneered 24-hour instant bank transfers in 2008, the “innovation frontier did not stop” and countries like Sweden and Brazil have surpassed it with advanced mobile payment systems. Speaking at City and Financial Global’s Payments Regulation and Innovation Summit on Monday, she looked ahead to a multi-money future where people “should be able to choose between traditional deposits, tokenized deposits, regulated, systemic stablecoins, and potentially a digital pound.” It is noted that the Bank and the Treasury are currently in a “design phase” for a digital pound, with a progress report expected later this year.

Chancellor Rachel Reeves plans to reduce the Treasury’s workforce by 300 roles by 2030, as part of a broader initiative to cut administrative costs by 16% across Whitehall. The department, which currently employs 2,100 staff, will offer voluntary redundancy packages of up to £100,000. A Treasury spokesperson said: “We’re at our biggest ever size, so in this stable period, it’s time to slim down to normal levels.” However, Abe Allen from the PCS union has warned: “You can’t grow an economy without the Treasury officials to guide it, so it would be very misguided for the Chancellor to do any kind of widespread redundancy programme.” Staff numbers at the Treasury have almost doubled in the past decade, according to the Institute for Government.

Amazon’s recent decision to let go of 16,000 employees has sparked debate over the role of AI in workforce reductions. N. Lee Plumb, a former head of AI enablement at Amazon, said AI “has to drive a return on investment,” adding: “When you reduce head count, you’ve demonstrated efficiency, you attract more capital, the share price goes up.” He went on to suggest: “So you could potentially have just been bloated in the first place, reduce head count, attribute it to AI, and now you’ve got a value story.” Economists like Karan Girotra from Cornell University have expressed scepticism about AI’s direct impact on job cuts, suggesting that companies may be using AI as a narrative to justify workforce reductions. A Goldman Sachs report indicates that AI’s overall effect on the labour market remains limited.

Rene Hass, CEO of Arm Holdings, has warned that UK start-ups struggle with risk-taking compared to Silicon Valley. Speaking on the Master Investor Podcast, he said: “There definitely is less appetite for risk and maybe that comes from less of an appetite for failing.” Mr Hass, who noted that UK start-ups face challenges due to a lack of investors willing to support them, called for increased venture capital in the UK to help businesses thrive. He also noted: “Scale matters – unfortunately, in this world, the UK is not at the scale that the US or China is.”

Barnsley has been designated the UK’s first Tech Town, receiving Government support to enhance AI tools and digital skills. This initiative includes testing AI tutoring in schools, offering free training for residents, and implementing AI in hospitals for efficient check-ins. Technology Secretary Liz Kendall stated: “Barnsley’s ambitions are crucial… if we can show that AI helps young people learn… then we can show what’s possible for the whole country.” Local leaders view this investment as vital for Barnsley’s economic future and community engagement through “Tech Town Halls” is planned.