The Bank of England has warned of increasing risks to the financial system due to ongoing market volatility and the Middle East conflict. The Bank’s Financial Policy Committee said the conflict was “likely to interact with vulnerabilities” in the UK economy, adding that while the financial system has been “resilient so far… the shock will weigh on growth, increase inflation and tighten financial conditions.” The Bank said that with the “global environment… materially more unpredictable as a result of the conflict,” this increases the likelihood of “large, frequent and potentially overlapping shocks, and episodes of intense market volatility.” Meanwhile, Prime Minister Sir Keir Starmer has acknowledged the economic turmoil, saying that he “had to level” with the British public that the impact “would not be easy.”

UK manufacturing costs have surged at the fastest rate in three and a half years, driven by the energy price shock from the conflict in the Middle East. Analysis from S&P Global indicates that input prices have risen significantly, climbing at the steepest rate since late 2022. Manufacturers have warned changes in oil and gas prices could dampen demand among buyers in the coming months. The overall manufacturing PMI came in at 51 on an index where a figure above 50 represents growth. However, sentiment decreased among all sectors. Cara Haffey, PwC’s UK leader of industrials and services, said business owners may fear that a rise in costs is permanent, suggesting that manufacturers “will be starting to think less about immediate disruption and more about their options in the longer-term.” Mike Thornton, head of industrials at RSM, commented: “Demand is being squeezed. New orders have ticked down, leaving the sector feeling pinched.”

David Postings, chief executive of trade association UK Finance, says the UK’s banking capital requirements hinder domestic lending and investment, necessitating targeted reforms to enhance growth while maintaining system resilience.

Chancellor Rachel Reeves has said that any Government support for rising energy bills will be based on household income. Speaking to the BBC, she said that assistance may not arrive until autumn, as demand typically increases during that period. In an interview with BBC Breakfast, Ms Reeves emphasised the need for targeted support, noting that measures introduce when Russia invaded Ukraine saw the best-off third of households receive more than a third of the support. The Chancellor said ministers are “looking at ways in which we can support people based on their household income.”

Two-thirds of hospitality businesses may cut jobs due to significant tax increases, according to a survey of over 20,000 firms. The changes, including higher minimum wage rates and increased business rates, will add £1.4bn annually to costs. Many firms plan to cancel investments and reduce trading hours. It was shown that 64% plan to cut jobs, 42% intend to reduce trading hours and one in seven will have to close. More than half (51%) said they would cancel investment plans. Trade associations including UKHospitality and the British Beer and Pub Association have urged the Government to reverse tax hikes, saying: “Yet again, hospitality businesses enter April facing billions of pounds in additional costs, which will force many to make heartbreaking decisions.” They added that even before the conflict in the Middle East began, “increasing energy prices were already impacting profitability and the Government should be prepared to support vulnerable businesses if they are thrown into yet another crisis.”

Family-run construction firms are nearing insolvency due to inheritance tax reforms, the Construction Plant-hire Association (CPA) has warned. The changes, effective from April 6, impose a 20% tax on inheritances above £2.5m. Construction suppliers say they will be disproportionately affected as their value often sits in equipment and machinery rather than in cash reserves. Six in 10 of the CPA’s more than 2,000 members say they are already cutting back on investment in equipment and machinery as a result of the IHT reforms.

Global mergers and acquisitions reached $1.2trn in Q1, with 22 deals worth more than $10bn. This marks the third consecutive quarter where deals hit $1trn.

UK hotels attracted more than £1.1bn in investment in the first quarter of the year, a 63% rise on the same period last year, underlining the sector’s resilience despite mounting cost pressures. Strong demand for high-quality assets, particularly in London, has driven activity, with major deals including the Marriott Grosvenor Square and Radisson Blu Leicester Square. The surge comes even as operators face steep increases in business rates following property revaluations, with average bills rising significantly.

UK small and medium-sized enterprises (SMEs) are grappling with economic challenges that threaten apprenticeship funding, according to Enginuity, a skills charity. The analysis shows that 25% of SMEs polled did not employ any apprentices, while 84% said that labour costs were the single biggest pressure on their prices. Enginuity also noted that apprenticeship starts for those under 19 have reached a five-year low. Ann Watson, CEO of Enginuity, said: “Direct contact with many organisations in recent days makes us extremely concerned. With 25% of respondents not employing any apprentices at all, and others telling us that they may stop employing them, this could prove disastrous for the skills system in the UK.”

The UK government is set to implement new rules to protect consumers from “subscription traps,” potentially saving them £400m annually. Starting early next year, consumers will receive reminders before free trials end and will be able to cancel subscriptions easily online. A new 14-day cooling-off period will also be introduced after trials or contract renewals.