Research from BTG reveals a 36.9% increase in UK businesses facing “critical financial distress,” with the total hitting 62,193 in Q1. The latest quarterly red flag report also notes a 9.6% rise in “significant” financial distress, affecting 634,867 businesses. Hotels and leisure firms are particularly impacted by rising labour costs and tax burdens, including a hike in National Insurance contributions. Ric Traynor, executive chair of BTG, said: “After initial signs that the UK’s GDP was improving at the very start of the year, it now feels like after taking a step forward, the UK has taken a few steps backwards following one of the most severe energy shocks in living memory.” Julie Palmer, managing partner at BTG, noted: “Inevitably we expect to see an increasing number of ‘zombie’ businesses tipped over the edge this year.”

At least two members of the Bank of England’s Monetary Policy Committee (MPC) are likely to support an interest rate increase. Chief economist Huw Pill is expected to lead this push, with analysts at BNP Paribas, Goldman Sachs and JPMorgan expecting hawkish policymakers to vote against leaving interest rates as they are. With experts saying the vote is unlikely to be unanimous, the MPC is expected to vote 7-2 to maintain the current rate at 3.75%. Suren Thiru, the ICAEW’s chief economist, said: “While the economic aftereffects of the Iran war have turned the Monetary Policy Committee notably more hawkish, a policy hold at 3.75% looks locked in given still heightened uncertainty over the ramifications of the conflict.” Harriet Guevara, chief savings officer at Nottingham Building Society, said that while it “feels very likely” that rates will be held, “the bigger story is how much the outlook has shifted. Just a few months ago, markets were pricing in further cuts.” She added that with the conflict in the Middle East driving energy prices higher and inflation expectations rising, “markets are pricing that rates are more likely to go up than down.”

Lloyds Bank has cautioned that the ongoing conflict in Iran could trigger “stagflationary pressures” in the UK economy. The bank revised its growth forecast from 1.2% to 0.5%. It anticipates rising inflation and unemployment, alongside a slowdown in the housing market due to high interest rates, currently at 3.75%.

Oil prices have surged following reports of a potential extended US blockade of Iran. Brent crude reached approximately $115 a barrel on Wednesday, up from just over $110 on Tuesday. The World Bank predicts energy prices could rise by 24% in 2026 if disruptions cease in May.

UK exports to the Middle East have decreased by 20% since the onset of the Iran war, according to the British Chambers of Commerce. Certificates of origin issued for exports fell from 15,437 in March 2025 to 12,360 in March 2026. Steven Lynch, director of international trade, said: “Our documentation data shows a clear and immediate shock to UK trade flows linked directly to disruption across the Middle East.” The conflict has led to increased delays and costs, particularly affecting SMEs, as firms navigate unreliable trade routes and rising insurance premiums.

Over 2m people have entered the income tax system, while stealth taxes have seen nearly £100bn raised for the Treasury. HMRC says it has logged 36.7m income taxpayers for 2023/24, up from 34.5m in the previous tax year. Since 2020, the number of higher-rate taxpayers in the UK has increased by 50%, reaching 5.76m in 2023/24. This rise is attributed to the higher-rate tax threshold being frozen at £50,271 since 2021/22, while incomes have continued to grow. The Government plans to maintain this freeze until 2030/31, which is set to result in more individuals entering higher tax brackets due to fiscal drag. Higher-rate taxpayers now represent 15.7% of all taxpayers and contribute 32% of total income tax revenue.

Financial experts have cautioned UK investors against relying on AI for investment decisions, saying that while the technology may be able to mimic seasoned investors, it can lack accuracy. Analysts recommend using AI for market research and as a sounding board, emphasising the importance of human judgement. Rohit Parmar-Mistry, founder of Pattrn Data, said: “Using AI to decide where to invest is a dangerous path,” while Colette Mason from Clever Clogs AI added that AI can provide plausible information but lacks the accountability of a regulated adviser.

The UK financial services sector is at risk of a scandal of similar scale to the £38bn PPI crisis due to inadequate AI governance, according to a report by regulatory compliance firm Zango. The report highlights a “capability gap” in AI deployment, with business leaders warning that unintended outcomes could escalate rapidly. The report warns that a lack of guidance has left the UK with a significant gap compared to the US. While the Financial Conduct Authority has insisted that its existing powers give it “enough regulatory bite that we don’t need to write new rules for AI,” concerns persist about the risks posed by new AI tools.

FIFA is close to obtaining a tax exemption for all 48 teams at the World Cup following negotiations with the US Treasury. This exemption would relieve national associations from federal taxes, although state and city taxes may still apply.