Andy Burnham is facing pressure to rein in Government spending as rising borrowing costs threaten to reduce the UK’s fiscal headroom. His former economic adviser Lord O’Neill says the Prime Minister should tackle “sacred cows” such as the pension triple lock and welfare spending to reassure bond markets and prevent higher debt-servicing costs from pushing up mortgage rates. The pension triple lock, which increases state pensions by the highest of inflation, earnings growth or 2.5%, could save almost £10bn if linked solely to earnings, according to the Resolution Foundation. Meanwhile, welfare spending is forecast to exceed £400bn a year by the early 2030s, with pensions and Universal Credit accounting for much of the increase. UK borrowing costs have risen sharply, with the 10-year gilt yield reaching 5.23% and the 30-year yield 5.87%. Economists warn this could have halved the roughly £24bn of fiscal headroom, while public spending is forecast to reach 44.9% of GDP.

Nicholas Hyett, lead alternatives analyst at Hargreaves Lansdown, warns that the UK faces a significant challenge in supporting its start-ups, with only 38% surviving five years post-incorporation, compared to 46% in the EU and 51% in the US. Domestic venture capital funding has dropped from 33% in 2015 to 25% in 2025, he notes, with this leading to increased reliance on foreign investors. Mr Hyett highlights the importance of venture capital trusts, which have directed £1bn annually into UK start-ups, supporting over 1,100 companies and 100,000 jobs. It is noted that the Government aims to boost local investment through the Mansion House Accord, targeting 10% of pension funds in private markets by 2030.

British households and businesses became more optimistic about the economy and their finances in August, according to a Centre for Economics and Business Research survey. Consumer confidence rose 0.9 points to 106.4, with people reporting improved views of both their financial position over the past month and their prospects for the next year. Business sentiment also strengthened significantly. The measure of business activity over the previous 30 days rose from 104.9 to 107.8, while expectations for the next 12 months increased from 115.2 to 117.7. However, short-term job security weakened, with the confidence measure falling from 92.3 to 91.5, although expectations for employment over the next year improved. Inflation and continued geopolitical uncertainty were highlighted as key risks.

Experts predict that Chancellor John Healey may need to raise taxes by up to £15bn in the upcoming Budget due to rising borrowing costs. This comes with the yield on UK government bonds having reached levels not seen in decades, increasing debt servicing costs. Professor Edward Jones from Bangor University warns that “further fiscal tightening” is likely necessary, while Ruth Gregory from Capital Economics says that the fiscal headroom has diminished significantly, potentially forcing Mr Healey to consider tax increases or spending cuts.

Investors anticipate three interest rate hikes over the next two years as gilt yields rise sharply. Two-year gilt yields have surpassed 4.5%, increasing borrowing costs and threatening economic stability. The Bank of England has held rates at 3.75%, but analysts warn of potential hikes due to inflation risks exacerbated by global events. AJ Bell analysts predict a gradual increase, with hikes expected in November, February, and June, potentially raising rates to 4.5%.

With the Scottish Government planning to introduce new council tax bands for properties valued over £1m by April 2028, the Scottish Conservatives have warned that these proposals would harm the housing market and discourage investment in Scotland.

The Department for Business and Trade has named 658 employers that failed to pay the minimum wage correctly, after enforcement action recovered £4m for more than 27,000 workers. Employers were also issued £7m in penalties. Major companies on the list include B&Q, which underpaid 4,530 workers by £456,934, and Five Guys, which underpaid almost 3,700 employees by £54,642. Serco also underpaid 374 workers by £36,303. All three companies said the errors were unintentional and that affected employees had since been reimbursed. The Government said it would publish naming lists more frequently to encourage employers to comply and ensure workers receive the legal minimum wage, which rose to £12.71 an hour for workers aged 21 and over in April.

James Reed, the CEO of recruitment firm Reed, warns that youth unemployment is becoming a national crisis, with more than 16% of 16- to 24-year-olds seeking work and over 1m not in employment, education or training. Vacancies, he notes, have fallen to 707,000, the lowest level in five years, while graduate opportunities have collapsed, with Reed listings falling from around 180,000 four years ago to 50,000 today and Adzuna reporting an 85% decline since 2017. Mr Reed argues that rising costs, AI and policies such as higher employer National Insurance and increased employment regulation are discouraging businesses from hiring. He calls for lower taxes on employment, changes to regulations affecting temporary and agency work, and policies that encourage businesses to recruit young people.

Maria Ward-Brennan in City AM says professional services firms are grappling with a skills gap as AI transforms the workforce. The traditional pyramid model is under scrutiny, with firms needing to adapt hiring and training strategies. She says new entrants, particularly Gen-Zers, are tech-savvy but often lack essential interpersonal skills. City law firms have introduced mandatory communication training for juniors, while EY’s US unit plans to invest $100m to reward staff demonstrating critical skills. A study by MIT warns that over-reliance on AI may impair critical thinking, posing a reputational risk for firms.

Gen Z shows a greater willingness to take career risks compared to older generations, with 48% willing to change jobs for more success or happiness, according to a survey of 4,375 US adults. Despite their risk-taking, 41% identify as “cautious strategists” in investing.