UK borrowing costs have surged to their highest levels since 1998, driven by the ongoing Iran war and political uncertainty ahead of this week’s local elections. The yield on 30-year government bonds reached 5.78%, while 10-year bonds peaked at 5.1%. The conflict has disrupted oil supplies, leading to increased inflation and borrowing costs. Thomas Pugh, chief economist at RSM UK, comments: “The prospect of a leadership challenge is yet another source of uncertainty for businesses and households that could prompt them to put off investment and spending.” The rapid increase in borrowing costs means the Chancellor has probably lost half of the £23.6bn of headroom she had in the spring, said Simon French, the chief UK economist at Panmure Liberum.

UK homebuyers are facing significant affordability pressures, with mortgage repayments typically consuming 21.3% of gross income in 2025, the highest level since 2008, according to UK Finance. The burden varies widely by region, with buyers in parts of London and the commuter belt spending over a quarter of income, while areas in Scotland remain more affordable at around 17%. Despite these pressures, mortgage activity remained strong, with lending for house purchases rising 17% year-on-year. High property prices and borrowing costs continue to weigh on buyers, while recent geopolitical events have added volatility to mortgage rates. However, some easing in fixed-rate pricing has emerged in recent weeks, offering limited relief.

The UK’s new car market registered 149,247 vehicles in April, marking a 24% increase compared to the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT). This growth reflects a rebound from previous tax rises that had dampened sales. Mike Hawes, SMMT chief executive, commented: “April’s rebound is welcome, but underlines just how significantly fiscal changes can influence the market.” The previous April saw lower registrations as many consumers advanced purchases to avoid tax increases.

New data from HM Revenue and Customs (HMRC) reveals that self-employed workers with lower incomes are more likely to miss the self-assessment deadline. In 2023-24, 5.9% of below basic rate taxpayers filed late, compared to 3.1% of basic rate taxpayers. Approximately 180,000 self-employed individuals submitted their returns after the January 31 deadline, with 94% being lower earners. Lisa Picardo, chief business officer at PensionBee, said: “Missing the deadline is often a symptom of a wider pressure that the system does not adequately account for.” HMRC aims to support timely filings through national campaigns and guidance.

The Trades Union Congress (TUC) is advocating for an increase in the bank surcharge from 3% back to 8% following the big four UK banks reporting nearly £14bn in profits for the first quarter. TUC General Secretary Paul Nowak said: “Getting banks to pay more tax on their profits is plain common sense when they’re raking in billions.” The TUC estimates that restoring the surcharge could generate £9bn over four years, while doubling it to 16% could yield £24bn.

A tribunal has ruled that a group of English football referees are not employees, rejecting HM Revenue & Customs’ (HMRC) claims for tax purposes. The ruling followed a decade-long legal battle where HMRC argued that referees should be classified as employees due to their commitments to the Professional Game Match Officials Ltd (PGMOL). However, the tribunal found that the referees maintained significant autonomy and were not economically dependent on PGMOL. Peter McCormick, representing PGMOL, said: “This case will deter HMRC from pursuing other test cases.” Dave Chaplin, chief executive of IR35 tax compliance firm IR35 Shield, added that this is “a decisive defeat for HMRC” and that the tribunal “has dismantled many of HMRC’s long-held assumptions about how status case law should be applied.” HMRC is now reviewing its next steps.

HSBC reported a pre-tax profit of $9.4bn (£6.5bn) for the first quarter, falling short of the $9.6bn target set by analysts. This represents a $100m decline from the previous year. The bank’s revenue grew by 6% to $18.6bn, driven by its wealth division, which attracted $39bn in net new money, primarily from Asia. However, a $1.3bn credit charge, significantly higher than the $400m from the same period last year, impacted profits. The lender also recorded a $400m fraud-related charge tied to collapsed UK mortgage lender Market Financial Solutions.

Nissan is reducing production at its Sunderland plant, the largest car factory in Britain, by merging two lines into one. The company is seeking a partner, potentially Chinese car maker Chery, to utilise spare capacity. Although Nissan claims there will be “no operational job losses,” uncertainty remains until a deal is finalised. The move raises concerns about the impact of high energy costs and competition from Chinese imports on UK manufacturing.

Less than 14% of financial services executives fully understand their exposure to the private credit sector, according to a KPMG report. Despite this, over 75% acknowledge it poses significant risks to UK financial stability. Neil Connor, head of asset management at KPMG UK, said: “The lack of understanding about private credit exposure amongst financial services executives is alarming.” The private credit market in the UK has grown by 56% since 2015, reaching $185bn (£138bn). Connor added: “Confidence in UK investment is fragile and private credit products can be complex, opaque and illiquid. The UK asset management industry must be keenly aware of suitability and understanding when it comes to promoting private credit.”

Challenger banks in the UK are experiencing a significant slowdown in loan growth, which has dropped to 4.5% in 2025 from 8.9% the previous year, according to a report by EY. Deposit growth also fell to 6.7% from 12.3%. Dan Cooper, head of banking at EY UK, noted that loan growth is “harder to come by in 2025,” but challengers are “continuing to trade well.” The report highlights a shift in customer behaviour towards debt repayment amid economic uncertainty, while pre-tax profit growth remains modest at 0.5%.