The ongoing conflict in the Middle East may significantly impact Britain’s economy, with inflation potentially rising to 5.8% if the situation persists, according to the Institute for Public Policy Research (IPPR). This increase could pressure the Bank of England to raise interest rates, affecting UK gilt yields. The IPPR estimates that Chancellor Rachel Reeves could lose up to £8bn in fiscal headroom due to weaker growth and higher borrowing costs. To mitigate inflation, the IPPR recommends capping household energy bills and cutting fuel duty. “The package would cost £5bn a year,” the report states.

The Bank of England’s quantitative easing (QE) programme is projected to cost taxpayers £125bn, an increase of £10bn from previous estimates. The Treasury is responsible for covering losses from QE, which was initiated to revive the economy post-2008 financial crisis. Critics, including Carsten Jung from the IPPR think tank, argue that the current framework imposes excessive pressure on public finances. Jung stated: “No other major economy imposes such large costs on its taxpayers as a result of monetary policy.” The Bank has also faced scrutiny for its active bond sales.

The British Retail Consortium (BRC) warns that UK retailers face rising costs due to the Iran war, which will likely lead to higher prices for consumers. BRC chief executive Helen Dickinson said: “The Middle East conflict is driving up costs across the supply chain and families are right to be concerned.” The BRC has urged the Government to alleviate pressures from National Insurance, packaging levies, and energy charges. A survey revealed that 73% of people expect product prices to rise, while food inflation could reach 9% by the end of 2026, according to the Food and Drink Federation.

Pat McFadden, the Work and Pensions Secretary, has warned that the ongoing Iran war could lead to job losses in the UK. He said the closure of the Strait of Hormuz, a vital oil shipping route, is driving up global energy prices, which may impact the labour market. McFadden noted that while the economy was improving earlier this year, the war’s effects could reverse this trend.

The Financial Conduct Authority and the Solicitors Regulation Authority are to probe poor practices across the claims management market. The move comes amid concerns that some claims management companies are misleading victims of financial scandals about their compensation, using aggressive marketing tactics, misleading advertising and imposing unfair exit fees. Aileen Armstrong, SRA executive director for strategy, innovation and external affairs, said: “When they work well, claims management services can benefit consumers. But we are concerned about poor practices and behaviours.”

The Financial Conduct Authority (FCA) is investigating Mastercard, Paypal, and Visa for potential anti-competitive conduct under the Competition Act 1998. The probe focuses on the “funding and usage” of Paypal’s digital wallet, which facilitates various payment methods. All three companies face scrutiny under Chapter I of the act, while Mastercard and Visa are also under investigation for possible abuse of market dominance under Chapter II. This follows previous regulatory challenges faced by Mastercard and Visa regarding card fees for overseas transactions.

The Financial Stability Board (FSB) warns that the private credit sector’s rapid growth, particularly in AI, poses significant risks. The healthcare, services, and tech sectors are the largest borrowers, with AI firms accounting for over a third of private credit deals in 2025. The FSB cautioned that a sharp correction in asset valuations could lead to substantial losses for investors. “This focus on specific sectors may leave private credit funds exposed to idiosyncratic risks,” the report stated. Traditional banks are also increasingly linked to this opaque sector, raising concerns about their exposure to potential failures.

The UK’s consulting sector is projected to grow by 5.7% this year, down from earlier estimates. The Management Consultancies Association (MCA) pointed to cost management and budget constraints as the primary concerns for business leaders. MCA chief executive Tamzen Isacsson said: “In challenging economic conditions, consulting is helping organisations move faster, manage risk and deliver real productivity gains.” Additionally, MCA said businesses are hesitant to adopt AI due to data security risks and skill shortages. The sector anticipates growth of 7.4% by 2027, despite current pressures.

According to the latest EY AI sentiment index, 74% of UK consumers have engaged with AI in the past six months, yet only 14% are comfortable with fully autonomous systems. Matthew Ringelheim, EY UK and Ireland AI leader, said: “Trust is not keeping pace with technological capability.” Concerns about data management and accountability persist, with only 43% trusting companies to handle AI-related data effectively. The report highlights a skills gap, as just 23% of consumers have received significant AI training, which could help them make more informed decisions regarding AI use.

European auditors have reported difficulties in tracing billions of euros from the Recovery and Resilience Facility (RRF), designed to aid EU countries post-COVID-19. The European Court of Auditors highlighted a lack of transparency regarding fund allocation, stating that many recipients remain unidentified. Ivana Maletić, who led the audit, said: “Without this information, we cannot assess whether funds are fairly distributed.” The European Commission defended the fund’s structure but acknowledged concerns about potential misuse, as past investigations revealed significant fraud cases involving relief funds.