The number of UK businesses in critical financial distress increased by 9% to 53,756 in Q2 2023, according to Begbies Traynor Group’s quarterly red flag report. Leisure and culture sectors were hit hardest, with a 27.1% rise, while hotels saw a 26.6% increase. Julie Palmer, managing partner at BTG, said: “The persistent rate of critical and significant financial distress in the UK is a clear sign that businesses are walking a tightrope.” Ric Traynor, executive chairman at BTG, added: “Rising energy prices are likely to push inflation higher again this autumn, squeezing consumers just as borrowing costs remain elevated.”

Experts say that re-joining the EU single market could deliver a significant economic boost by removing much of the trade friction and red tape created by Brexit, particularly for the UK’s services sector. Research estimates the move could add £92bn to GDP and recoup up to 90% of Brexit’s economic hit, while restoring greater labour-market flexibility, investment certainty and attractiveness for foreign direct investment. With 41% of UK exports going to the EU in 2025, closer integration could also strengthen trade and productivity through greater competition. However, Thomas Pugh, chief economist at RSM, cautions that the gains would depend heavily on the terms of re-entry and would not necessarily reverse all the economic damage already caused by Brexit. Critics argue that weaker UK competitiveness, limited manufacturing capacity and uncertainty over migration could constrain the upside.

A growing number of young, skilled Britons are leaving for better pay, opportunities and lifestyles abroad, with 246,000 British nationals emigrating last year, more than twice the number returning.

Bank of England insiders warn that the rise of AI could lead to prolonged high interest rates, with increased productivity from the use of the technology likely to boost spending and investment, driving up prices. Jenny Chan, an adviser to the Monetary Policy Committee, noted that expectations of future productivity can alter current behaviour, leading to demand outpacing supply. This scenario could trigger inflationary pressures, necessitating tighter monetary policy. The report highlights parallels with the 1990s tech boom, where rising productivity also contributed to inflation.

Office for National Statistics (ONS) data shows that Government borrowing unexpectedly rose to £1.8bn in July. This was £700m higher than a year earlier, despite economists having expected borrowing to be zero and the Office for Budget Responsibility (OBR) predicting a £500m surplus. July saw income tax receipts of £17.1bn, with this up £1.7bn year-on-year. However, this was outweighed by higher spending. Social benefit payments rose by £2bn, while debt interest costs increased by £700m to £7.7bn. Borrowing over the first four months of the financial year reached £56.7bn, exceeding OBR forecasts, although it remained £6bn lower than a year earlier following revisions to previous data. Total UK debt stands at £2.985trn, or 94.1% of GDP.

Data tracked by S&P Global shows that the economy picked up in August, with private-sector growth reaching a four-month high as stronger services activity offset weaker manufacturing. The overall PMI rose to 52.5 from 52.2 in July. However, private-sector employment has fallen for a record 23 consecutive months, while unemployment has risen from 4.4% to 4.9% since mid-2024. High staffing and energy costs, alongside higher employer National Insurance and the minimum wage, are weighing on hiring. Business sentiment has improved, but concerns over Government policy, the Middle East conflict and persistent cost pressures remain. Jake Finney, a senior economist at PwC, said the output figures point to a rebound in the economy and could contribute to annual growth rate of just above 1% for 2026.

Economists have warned that the Government will struggle to deliver major cost-of-living support without tax rises, as higher gilt yields and weaker-than-expected borrowing have reduced the Government’s fiscal headroom. It has been suggested that higher borrowing costs could cut around £7bn from the Government’s £23.6bn fiscal headroom. Item Club’s Matt Swannell said Chancellor John Healey has “limited room for manoeuvre” and warned that “anything more fundamental” than low-cost measures would require spending cuts or tax rises, while RSM economist Thomas Pugh said that tax rises at the budget were “inevitable.”

Steven Fine, chief executive of Peel Hunt, has called for stamp duty on shares to be scrapped, saying: “I don’t think anyone in this country thinks stamp duty on anything is a good idea. It’s a pernicious tax. It’s a tax on doing things – it’s a tax on moving out, it’s a tax on transferring assets.” He added: “It stops the market from working properly. It’s a tax on the market.” His comments come as London’s IPO drought continues, with some bankers warning it may persist into the first half of 2027 despite existing tax incentives.

Szu Ping Chan in the Telegraph looks at how frozen tax thresholds have pushed millions into higher tax bands, boosting Government revenues while helping successive chancellors avoid explicit tax rises. Economists, she notes, have warned fiscal drag cannot be relied upon indefinitely as private-sector wage growth slows. Ms Chan argues that further tax rises, particularly on profitable sectors such as banking, could discourage investment and ultimately damage the economic growth the Government needs to fund its spending plans.

The Government plans to reform business rate valuations for pubs and hotels in England and Wales. An independent review, led by business rates specialist Jerry Schurder, will assess the current system and report to the Treasury by March 2027. The Conservatives have warned that the review of rates will come too late to prevent hundreds of pubs and other hospitality businesses from closing. Businesses, the Tories warn, are already facing higher costs after pub rateable values rose by an average 30% this year and pandemic-era rates relief ended. Pubs have also been hit by higher employers’ National Insurance, VAT, wages and energy bills.

The Government could spend billions of pounds on infrastructure to enhance the UK’s gas imports. Ministers are considering either a government-backed LNG storage and regasification ship or a strategic gas reserve to protect Britain against energy shocks. The Government says gas will remain essential for decades as North Sea reserves decline and Britain relies increasingly on imports. The proposals have drawn criticism from the North Sea industry, which argues that domestic gas is almost four times cleaner than imported LNG and would reduce reliance on foreign supplies.

Trade unions have warned that proposed rules implementing Labour’s ban on exploitative zero-hours contracts risk falling short of the party’s manifesto commitment. Usdaw, GMB and Unite are concerned that an upper hours threshold and a proposed “regularity requirement” could exclude significant numbers of workers from the right to guaranteed-hours contracts, creating loopholes that would weaken the reforms. The TUC has also rejected business claims that the measures could cost employers up to £2.9bn a year as “scaremongering,” arguing that much of the estimated cost assumes no changes in employers’ scheduling practices. A Government spokesperson said ministers are consulting with business and trade unions “to get the detail right and ensure this works in the real world.”

A proposed ban on last-minute shift changes could harm the economy, according to the Federation of Small Businesses (FSB). The FSB, representing 5.5m firms, argues that requiring at least seven days’ notice for rota changes will lead to staff shortages. They warn that this could disproportionately affect those with caring responsibilities and health issues. The FSB said: “Ending on-the-day offers of work is tantamount to excluding many people in this position from the labour market.” The Government’s plan may cost businesses up to £3bn annually due to increased bureaucracy and fines.

Heatwaves are making air conditioning a crucial requirement for London office staff, exposing a divide between modern City buildings and older West End properties struggling to cope with rising temperatures.