Chancellor John Healey has outlined a vision for economic growth that he says people will feel in their pockets. In a statement ahead of an upcoming speech, he emphasised the importance of new factories, job opportunities for young people, and revitalised high streets. Mr Healey, who said his plans are “about growth that you can actually see and feel,” will look to leverage Britain’s strengths, including its financial centres and universities, to foster ambition and enterprise. While he acknowledged potential challenges from global events, including inflation linked to the US-Iran conflict, the Chancellor said: “The answer to an uncertain world is not to sit back and hope for the best. It’s to back ourselves.” Mr Healey previously insisted that he would ensure the UK emerges from his first Budget with a solid “buffer against uncertainty.”

The UK economy is expected to have contracted by 0.1% in July, according to economists. This decline follows a 0.3% growth in June, driven by hospitality and leisure sectors. Analysts suggest that the increase in household energy costs and weak retail sales have contributed to this downturn. Investec said that while a positive first half of the year saw the UK economy grow by 1% and outperform the rest of the G7, “we expect the third quarter will begin with a weaker performance.” Robert Wood of Pantheon Macroeconomics expects Office for National Statistics data to reveal a 0.1% decline for July but predicts that growth will slow to 0.2% in Q3.

Business confidence in the UK has surged to its highest level in nearly two years, according to BDO’s business optimism index, which reached 94.22 in August. This increase is largely driven by a rebound in the services sector, with the output index rising to 98.37. Despite inflation concerns linked to the conflict in Iran, the travel and leisure industries have thrived. Scott Knight, BDO’s head of growth, said: “With output on the up, it’s no wonder businesses are starting to feel a little less gloomy.”

Andrew Bailey, governor of the Bank of England, has warned that rising defence spending, ageing populations, weak growth and climate-related costs are putting growing pressure on government bond markets, contributing to the recent surge in borrowing costs. UK gilt yields have risen sharply, with 10-year yields reaching 5.28%, their highest level since 2007, while Britain recorded the biggest rise in bond yields among G7 countries. Mr Bailey said governments face increasingly difficult decisions over how to finance higher defence spending without further increasing debt. The warning comes as the Government considers raising defence spending to 3% of GDP, while facing a nearly £5bn funding gap in its existing defence investment plans. The Resolution Foundation said significant tax rises, including on middle earners, may be unavoidable if spending is increased.

The British Chambers of Commerce (BCC) has cautioned Chancellor John Healey against tax increases in the upcoming Budget, warning that hikes would lead the UK towards economic decline. Director General Shevaun Haviland emphasised the need for cost reductions to support businesses, saying: “Piling more taxes on firms would be a road to ruin.” She stressed that pro-growth decisions “have never been more urgent,” arguing that they are crucial for job creation and economic recovery. The BCC has proposed measures such as cutting employer National Insurance Contributions for under-25s and reducing business rates to alleviate financial pressures on firms.

HMRC is set to manually review 107,000 tax calculations from 2025/26 due to a longstanding computer-system flaw which incorrectly allocates taxpayers’ income and savings allowances. The problem, first identified in 2021, means HMRC’s systems do not always apply the “beneficial ordering” rules that should minimise a taxpayer’s bill. HMRC has not yet determined how many calculations are actually wrong, and experts warn that errors could remain undetected in cases not selected for review unless taxpayers spot them themselves. Stefanie Tremain of Blick Rothenberg said: “We may not be talking about huge amounts but you don’t know how much that money is worth to the person who is receiving it.” An HMRC spokesman noted that the number of calculations requiring a manual check is expected to fall to around 20,000 next year.

Family-owned manufacturers are warning that inheritance tax (IHT) reforms and high energy costs are threatening investment, succession and ownership. A survey by Make UK and Bishop Fleming found that 78% of family-owned firms are concerned about the impact of IHT changes, while 22% are considering selling to overseas buyers and 18% to UK buyers. High energy costs were the biggest barrier to growth, cited by 59% of manufacturers, with economic uncertainty and taxation also major concerns. Neil Davy, chief executive of Family Business UK, comments: “This research adds to a growing body of evidence showing changes to business property relief are having real consequences for family-owned firms and the wider economy.”

Companies House is undergoing a major overhaul, with new powers helping it clean up the UK’s corporate register and crack down on fraud and economic crime. Since November, it has verified the identities of 5m directors and company owners across 9m roles, removed 151,000 hijacked addresses and taken action against tens of thousands of companies. It expects to challenge 225,000 companies in the year to next March. The reforms, introduced under the Economic Crime and Corporate Transparency Act 2023, have given the registry greater powers to amend records, fine directors and pursue prosecutions, while AI is being used to identify criminal activity and support the National Crime Agency. Companies House is also rolling out mandatory identity verification, due to cover all existing directors and people with significant control by November.

Phillippa O’Connor, UK chief people officer at PwC, says graduates are more enthusiastic about office working than older employees, particularly parents and carers who became accustomed to remote work during the pandemic. She says younger staff value being in the office for networking, learning from colleagues and gaining exposure to senior employees and clients. PwC expects staff to work in the office at least three days a week, while offering parents and carers greater flexibility. Research from PwC and the Social Market Foundation think-tank also found that the quality of a person’s first job can have a major impact on their career, with it shown that those starting in roles offering strong training, support and progression opportunities earned an average of £55,000 by age 35, compared with £27,000 for those entering lower-mobility roles.

KPMG and the Recruitment & Employment Confederation analysis shows that hiring improved in August, with an index of permanent job placements rising to 50.5 from 50 in July.

Bank of England governor Andrew Bailey, who also serves as chairman of the Financial Stability Board, has warned that a sharp fall in the value of AI companies could trigger a global market sell-off, with risks heightened by expensive stock valuations, increased investor borrowing and heavy concentration in a handful of US technology companies. With Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia and Tesla making up around 33.8% of the S&P 500, there have been comparisons with the dotcom bubble. However, analysts say the leading AI companies are fundamentally different as they are established, highly profitable businesses with substantial revenues and strong balance sheets.

The London Property Alliance has warned that proposed net zero building rules from Mayor Sadiq Khan could constrain the capital’s growth by making taller developments harder to deliver. The group, representing 400 investors and builders, said a proposed embodied carbon limit of 605kg per sq metre was unrealistic for skyscrapers. It noted that central London buildings currently average 720kg, while even a 38-storey low-carbon tower recorded 681kg. The alliance said the rules could make towers above 30 storeys “substantially more difficult” to build, despite rising demand for office space. The City of London Corporation aims to add 1.2m sq metres of offices by 2040, largely through high-rise development.