Businesses in Britain are preparing for increased costs and hiring challenges as the Employment Rights Act takes effect. The British Retail Consortium (BRC) warns that while some provisions, like bereavement leave, are beneficial, others could strain employers. Helen Dickinson, BRC’s chief executive, said: “Retailers are facing significant cost pressures.” The new law mandates guaranteed hours for workers on zero-hour contracts and introduces a Fair Work Agency to enforce rights. Anna Vishnyakov from PwC noted that compliance will be complex and costly for employers, urging them to prepare their systems accordingly. The Telegraph reports that the new law grants the Fair Work Agency sweeping powers to conduct unannounced inspections, seize documents, and arrest individuals suspected of labour market offences.

Skycutter, a UK-based drone manufacturer, may relocate to the US due to slow government support. The company recently secured a $200m (£151m) contract with the US military, prompting concerns about its future in the UK. Skycutter has developed drones for Ukraine and is considering its options. A Ministry of Defence spokesperson said that since July 2024, “we have signed nearly 1,200 major contracts, with 93% of that spend going to UK-based companies.”

John Vincent, the founder of Leon, has accused the Government of “killing” the restaurant industry due to excessive tax burdens. Speaking on Times Radio, he said: “Everyone knows restaurants are done.” Recent tax increases have led two-thirds of hospitality firms to consider job cuts, with many planning to reduce trading hours or shut down entirely. Vincent, who bought back Leon for £30m to £50m after selling it for £100m, noted that the pandemic and tax hikes have severely impacted customer numbers. He expressed concern for long-standing restaurant owners facing closure.

The UK Government’s new inheritance tax policy threatens the future of family-run businesses, according to industry leaders. The 20% tax on inherited business stakes, effective from Monday, has sparked concerns about forced sales and stifled investment. Drinks tycoon Steve Perez stated: “Most businesses will end up having to be sold.” Despite raising the tax threshold from £1m to £2.5m, many believe it won’t alleviate the financial burden. Fiona Graham of Family Business UK warned that the changes could lead to significant economic losses and urged the Government to reconsider its approach.

HMRC will soon issue tax bills to UK savers with £3,500 or more who exceed their tax-free interest allowances. Rising interest rates and frozen tax thresholds mean an additional 120,000 people will be affected by 2025/26. Approximately 2.79m individuals, including 1.42m basic rate taxpayers, are expected to receive notifications. Tax rates vary based on income bands and account types. Andrew Wright from Paragon Bank noted that retirees with modest incomes are particularly impacted, stating: “It’s unfair they are being punished through a tax system not initially designed for them.”

OpenAI has proposed a tax on automated labour to address potential economic risks from artificial intelligence (AI). In its report, “Industrial Policy for the Intelligence Age,” the company suggests that major economies should shift from payroll-based taxes to increased taxes on corporate profits and capital gains. OpenAI pointed to the need for wage-linked incentives to help retain and retrain workers amid fears of rising unemployment due to automation. The firm stated: “While we strongly believe that AI’s benefits will far outweigh its challenges, we are clear-eyed about the risks.”

The prospect of rising inflation linked to the Iran war is prompting unions to push for higher public sector pay, potentially costing £5bn, complicating government budget constraints and service protection.

The UK economy is facing stagflation as growth in the services sector stagnated in March, according to S&P Global. The ongoing conflict in the Middle East has contributed to the slowest output growth since April, while input price inflation has surged. Tim Moore, economics director at S&P Global, said: “Stagflation risks appear to have increased.” Thomas Pugh from RSM warned that a recession is becoming more likely. Business confidence has plummeted, and firms are struggling with rising costs, particularly in energy and raw materials, as they await President Trump’s next moves regarding Iran.

The IMF has warned that emerging markets are increasingly vulnerable to global shocks due to their reliance on volatile capital sources, particularly hedge funds. Since the 2008 financial crisis, foreign investment in these markets has surged, with inflows nearing $4tn by 2025. Debt from foreign investors now averages 15% of GDP, up from 9% in 2006. The IMF noted that sharp capital retrenchments could lead to increased borrowing costs and currency depreciations. “These risks have come to the fore in the context of the war of the Middle East,” IMF staff stated.

Jamie Dimon, the CEO of JPMorgan Chase, has warned that the ongoing conflict in Iran could lead to significant interest rate shocks, along with the reshaping of global supply chains. He noted that rising oil and gas prices will likely cause persistent inflation, pushing interest rates higher. Dimon said: “We face the potential for significant ongoing oil and commodity price shocks.” The Bank of England recently maintained interest rates at 3.75%, but market traders anticipate two rate increases this year. The OECD predicts that both the Bank of England and the US Federal Reserve will keep rates steady throughout 2026.

Rachel Reeves has been accused of blocking £17.5bn in North Sea investments by shelving plans to abolish a windfall tax on oil and gas. Companies had proposed projects that could yield over 1bn barrels of oil and gas by 2030, contingent on tax reforms. A government source noted that the conflict in Iran altered profit dynamics. Industry figures argue that without tax changes, investments remain unviable. Linda Cook, CEO of Harbour Energy, stated that failure to reform the windfall tax means investments are “on the shelf.” Ben Ward from Offshore Energies UK stresses the importance of domestic production for energy security.

Almost a third of companies plan to adopt algorithmic pricing tools, according to the Bank of England’s analysis. Clare Lombardelli, deputy governor for monetary policy, noted that 31% of firms expect to use dynamic pricing within a year, up from 21%. This trend, prevalent in online travel, could lead to unexpected price spikes, complicating inflation tracking. Lombardelli commented: “A world of more fluid and bespoke prices could make life harder for statisticians.” While no evidence links algorithmic pricing to higher inflation yet, it may influence household inflation perceptions of price stability, Lombardelli added.