Investment by British businesses has dropped to its lowest level since the pandemic, according to the British Chambers of Commerce (BCC), with confidence also slipping in the three months to the end of June. Concerns over inflation persist and less than a third of firms boosted their sales in the period. The retail and hospitality sectors are particularly affected, with many expecting decreased turnover. The report also highlights a cycle of risk aversion among SMEs due to rising costs and geopolitical tensions. Warning of the impact of Government measures such as the hike in employer National Insurance, David Bharier, deputy director of economics and insight at the BCC, said: “Most firms are now experiencing policy as downside risk rather than opportunity.”

UK manufacturers increased their investments in the US by 23% last year, with pharmaceutical companies doubling their spending, according to a report by British American Business. This comes after President Donald Trump imposed a 10% tariff on goods imported from the UK in an effort to see more manufacturers setting up or expanding factories in the US.

Lord O’Neill of Gatley, a senior economic aide to Andy Burnham, has called for a significant overhaul of the UK’s tax system. In a letter signed by Lord O’Neill and five other economists, they warn that increasing taxes has not improved public services. The letter accompanies a report by the UCL Institute for Global Prosperity which proposes simplifying the tax system and creating a single levy – a “national contributions” tax – to replace income tax, National Insurance and taxes on capital gains, dividends and inheritance. Stamp duty, it argues, should be replaced with a 1% levy on property valuations. The report also suggests boosting fiscal headroom to £38bn and says these measures could raise £18bn.

The construction industry has experienced job losses for the 18th month in a row, with this driven by significant declines in house building and new home sales. The S&P Global Purchasing Manager’s Index (PMI) for June recorded a reading of 38.4 on a measure where a figure below 50 points to contraction. House building activity fell sharply, with a reading of 35.6, as the industry grapples with uncertainty and delayed projects. Tim Moore, economics director at S&P Global Market Intelligence, noted that construction firms face challenges from high interest rates and reduced consumer spending.

Liam Byrne, chairman of the Business and Trade Committee, has urged ministers to reconsider the Government’s “inadequate” response to support small business growth in the UK. The committee highlighted that small businesses face pressures similar to those during the pandemic and has called for a “more coherent and ambitious plan” to address issues like business rates and late payments. Mr Byrne said that when the committee published its initial report in February, “we warned that many firms were facing cost pressures comparable to the pandemic,” adding: “Since then, those pressures have only intensified.”

The Financial Conduct Authority (FCA) has called for tighter oversight of AI in financial services, having warned that the technology will significantly impact retail finance over the next decade. The report suggests expanding the FCA’s regulatory scope and creating a public-interest AI financial guidance service.

Business activity in the UK financial services sector has sharply declined, according to the Confederation of British Industry (CBI). The net reading for business activity fell from 65 in March to -58 in June. Firms reported deteriorating profitability and cited poor investment returns as a key growth limitation. Political uncertainty, particularly regarding the change of Prime Minister, has heightened concerns and Elizabeth Hart, senior investment director at Rathbones, noted that clients are worried about potential changes in taxation and financial planning rules.

Banks and building societies have surpassed the retail sector in the latest UK Customer Satisfaction Index. This marks the first time the banking sector has taken the lead since the index began in 2008. Nationwide Building Society achieved the highest score for customer service, contributing to the banking sector’s overall score of 82 out of 100. In comparison, non-food retail scored 81, while food retail scored 80.6. The Institute of Customer Service attributes this shift to increased focus on customer satisfaction, driven by the Consumer Duty standard introduced in 2023.