The UK economy is projected to grow by only 1% this year, primarily driven by public sector output, which is expected to rise by over 3%. Writing in the Telegraph, Roger Bootle, senior independent adviser to Capital Economics, notes that consumer confidence remains weak due to rising living costs and uncertain employment prospects. Upcoming data releases on labour market and inflation are crucial. Bootle says: “It is possible that the Monetary Policy Committee will lop another 0.25% off the Bank’s rate,” but cautioned that rising inflation may delay such decisions.

UK inflation may have increased in December, driven by higher travel costs and tobacco duties. Economists at Pantheon Macroeconomics predict a rise to 3.3%, up from 3.2% in November. Andrew Goodwin, chief UK economist at Oxford Economics, predicts a rise to 3.6%, noting that the timing of data collection would be crucial for the final reading. While some analysts, like those at Barclays, expect inflation to remain at 3.2%, broader trends suggest inflation will decrease over the year.

Donald Trump’s proposed 10% tariffs on UK goods could severely impact the British economy, potentially leading to a recession. The tariffs, which may rise to 25% if a deal for Greenland is not reached, affect key exports like cars, pharmaceuticals, and machinery. William Bain from the British Chamber of Commerce warned that the tariffs will further harm UK exporters already struggling with previous levies.

Analysis by the London Chamber of Commerce and Industry (LCCI) suggests confidence among businesses in the capital is at an unprecedented low. The LCCI’s quarterly survey revealed that only 25% of businesses expect economic improvement in 2026. The Employment Rights Bill is cited as a key factor, with many employers hesitant to hire due to increased costs and risks. LCCI chief executive Karim Fatehi said: “Employment protections are vital but the balance of power has tipped too far the other way.”

New data from the Scottish Liberal Democrats reveals a decline in small and medium-sized enterprises (SMEs) in Scotland since 2020. The number of SMEs has decreased from 177,020 to 171,660, a drop of 5,360. Jamie Greene MSP, the party’s economy spokesman, highlighted that 24 constituencies have experienced a decline, particularly in rural areas. He said: “These figures show concerning drops in the number of small and medium-sized businesses across Scotland.” The Scottish Liberal Democrats have secured funding in the draft budget to support businesses, but Greene insists more action is needed.

The UK Government plans to announce significant reforms to the Competition and Markets Authority (CMA) this week. The changes will abolish the CMA’s panel system, limiting its ability to assess mergers, particularly those involving foreign companies. The reforms aim to streamline the CMA’s processes, merging market studies and investigations into a single procedure lasting six to twelve months. Officials claim the reforms will cut delays and provide greater certainty for companies pursuing mergers in the UK. However, critics argue these changes may undermine the independence of merger investigations. “There is a risk in relation to what an interventionist politician could do as it makes the system more vulnerable to political influence and gives far more discretion to the CMA’s CEO and board to be more or less interventionist,” one regulatory lawyer told Sky News.

Businesses worldwide are bracing for a challenging year as 82% fear cross-border investigations, according to Baker McKenzie. Singapore and Hong Kong lead concerns among legal professionals, with 88% and 85% respectively. Cybersecurity and tax risks dominate, evolving into key regulatory tools. Trade policy worries are high in Germany and the UK, with 84% expressing concern. A separate report from BCG finds that global policy uncertainty is at an all-time high. Sunny Mann, global chair of Baker McKenzie, noted: “Organisations are more globally connected than ever, yet operating in an increasingly fragmented and unpredictable geopolitical environment.”

UK jobs are at risk due to reliance on trade with China, according to the Institute for Public Policy Research (IPPR). The report highlights that around 90,000 jobs, particularly in clean energy and automotive sectors, could be threatened by geopolitical tensions. Pranesh Narayanan, senior research fellow at IPPR, said: “These shocks ultimately hurt the UK economy because we rely so much on trade to source the essentials.” The report calls for the Government to adopt strategies like stockpiling, investment partnerships and keepshoring – which involves the retention domestic production capacities – to mitigate risks from potential disruptions.

US President Donald Trump has promised to hit eight European nations with a 10% tariff from next month unless they accede to his demands to acquire Greenland. The new levies would apply to France, Germany, the UK, the Netherlands, Denmark, Norway, Sweden and Finland, and would rise to 25% in June. Trump cited the need to develop a defence system to protect global peace and decades of subsidising European countries as the rationale for the move. Sir Keir Starmer said the future of Greenland was a matter for Denmark and the Greenlanders, despite joining other countries in sending military resources to the island recently in an effort to dissuade Mr Trump from his ambitions to annex the territory. Addressing this issue in his Truth Social post, President Trump said: “These Countries, who are playing this very dangerous game, have put a level of risk in play that is not tenable or sustainable.” European leaders along with opposition party leaders in the UK roundly opposed the new trade levies.

Labour’s extension of the windfall tax on oil and gas companies until 2030 has raised concerns among MPs about potential job losses and industry decline. The energy profits levy, now at 38%, results in a total tax rate of 78% on profits. The Scottish Affairs Committee has voiced criticism in a report, highlighting the levy’s negative impact on investment and production. Patricia Ferguson, committee chair, said: “Keeping the energy profits levy in place for another four years risks accelerating the industry’s decline.” Russell Borthwick, chief executive of the Aberdeen & Grampian Chamber of Commerce, said: “The reality is stark. The levy leaves the UK with one of the most uncompetitive fiscal regimes in the world, despite the oil and gas price spike ending more than three years ago.”

According to new forecasts from HMRC, 2m people will fall into the £100,000 tax trap by the 2026/27 tax year. An additional 112,000 individuals are expected to exceed this threshold, losing 62p of every pound earned between £100,000 and £125,140 due to the tapering of the tax-free personal allowance. Childcare support will also be withdrawn for families with one parent earning over £100,000. Rob Lewis from Celtic Financial Planning expressed concern over high earners potentially leaving the UK for better tax conditions, saying many “could do their job anywhere.” Olly Cheng, of wealth manager Rathbones, commented: “By 2028/29, nearly 2.3m taxpayers are expected to earn above £100,000 – almost half a million more than the estimate for the current tax year. For families with young children, this will be particularly painful.” He added: “With bonus season approaching, what looks like a reward can quickly turn into a tax shock.”

Analysis by UHY Hacker Young shows that 5.6m UK taxpayers overpaid in 2023/24 due to HMRC errors, with overpayments totalling £3.47bn. Meanwhile, analysis shows that some people are waiting a year for the tax office to refund overpaid tax and National Insurance contributions. An investigation by the Guardian found that some refunds that were previously processed within a few weeks are taking the best part of a year. The ICAEW said “significant backlogs” were having a negative impact on businesses and individuals, noting that HMRC’s focus on response targets for current claims means older requests have been nudged to the back of the queue.

California billionaires are opposing the proposed 2026 Billionaire Tax Act, which would impose a one-time 5% tax on residents with a net worth exceeding $1bn. Democratic Representative Ro Khanna supports the bill, stating it aims to fund essential services. However, critics warn it may drive wealthy residents out of the state. Jensen Huang, CEO of Nvidia, supports the tax, saying: “I’m perfectly fine with it.” In contrast, Governor Gavin Newsom opposes the bill, citing potential economic damage. The proposal requires around 900,000 signatures to be placed on the November ballot.

Rachel Reeves has praised new listing rules claiming they have revitalised the City of London. The Chancellor noted early signs of increased equity market activity and investor interest. Reeves said: “Two years ago, some said the City’s best days were behind it. They were wrong.” The improved sentiment comes as the Financial Conduct Authority looks to implement rules making it cheaper and quicker for companies to raise funds in the UK. PwC’s UK IPO leader, Vhernie Manickavasagar, said: “London has delivered its strongest year for IPO and listing activity since 2021” with momentum expected to continue into 2026.

Research by Vodafone Business reveals that 10% of British firms could face closure following a cyber-attack. The study highlights poor crisis planning, weak password practices, and employee susceptibility to phishing scams as major vulnerabilities. On average, employees reportedly use their work passwords for 12 personal accounts. Nearly 75% of business leaders believe at least one staff member would fall for a convincing phishing email. Nick Gliddon from Vodafone said: “These findings are truly alarming,” emphasising the significant risk faced by UK businesses.

One in ten business leaders avoid meeting junior colleagues due to fears of false allegations, according to a YouGov survey by Nardello & Co. The study revealed that 25% of leaders consider reputational damage a top concern, with 20% worried about managing wrongful allegations. Alan Kennedy, managing director at Nardello, noted that advancements in AI complicate the challenge of false narratives. Additionally, 42% of businesses are concerned about the reputational impact of data breaches, while 30% cite financial crime as a major threat.