Business news 25 June 2025
Manufacturing, interest rates, economic forecast, grocery inflation, AI, defense, tax, millionaire exodus, farmers, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Manufacturing output hits new lows
The UK’s manufacturing sector is facing significant challenges, with a recent survey by the CBI revealing a 23% decline in production over the past three months. The downturn affects 15 out of 17 sub-sectors, including the chemicals and mechanical engineering industries. Business leaders are urging Chancellor Rachel Reeves to support training and technology initiatives with immediate actions, as high energy costs and skills shortages continue to hinder growth. CBI lead economist Ben Jones pointed to the need for the Government to “dismantle barriers to growth” and implement energy cost interventions swiftly. Despite some signs of recovery, Pantheon Macroeconomics’ Elliott Jordan-Doak cautioned that the sector’s sentiment and activity may remain weak for the foreseeable future due to ongoing trade uncertainties.
Softening labour market could lead to rate cuts – Bailey
Bank of England Governor Andrew Bailey indicated that the labour market is “softening” and wage growth is declining, which may lead to interest rate cuts. The Monetary Policy Committee (MPC) recently voted 6-3 to maintain interest rates at 4.25%. Bailey noted that firms are unlikely to continue raising pay at the current rate, saying: “Pay increases are still well above a level consistent with the target. However, I get the message pretty consistently they are coming off.” Deputy Governor Dave Ramsden supported a rate cut due to falling employment and vacancies, suggesting that inflation risks are shifting. He stated: “I assessed that the signals from the labour market provided a sufficiently strong case for a reduction in Bank Rate to 4%.” Concerns about inflation remaining above 3% were echoed by external MPC member Megan Greene, who warned of potential impacts on wage and price-setting behaviour.
Britain’s economy faces grim forecast
Forecasters predict a troubling outlook for Britain’s economy, with a projected contraction of 0.3% in the second quarter of 2025, reversing the previous quarter’s growth of 0.7%. Rachel Reeves, the Chancellor, faces mounting pressure to adjust her spending plans, with Paul Johnson from the Institute for Fiscal Studies stating that she is “inevitably” heading for tax increases to support her commitments. The economic downturn is attributed to various factors, including President Donald Trump’s tariff war, which is expected to reduce GDP by 0.2%. Additionally, rising inflation due to Middle Eastern chaos and domestic policies, such as increased National Insurance for employers, are complicating the situation. The Confederation of British Industry has also expressed concerns about the impact of these policies on small and medium-sized businesses, highlighting the significant pressures faced by the UK’s manufacturing sector.
Grocery price inflation hits 4.7%
British grocery price inflation has surged to 4.7% for the four weeks ending June 15, marking the highest level since March last year, according to Kantar. This increase, up from 4.1% in the previous month, is attributed to rising costs of items like chocolate, butter, and meat. Tesco highlighted that new employer taxes and regulatory costs are exacerbating inflationary pressures amid rising commodity prices. The Institute of Grocery Distribution predicts food inflation could approach 5% this year. While grocery sales value increased by 4.1% year-on-year, volumes fell by 0.4%, indicating the first decline this year. Tesco, Sainsbury’s, Lidl GB, and Ocado reported significant sales gains, while Asda experienced a 1.7% decline.
AI investment surge among British firms
British firms are increasingly investing in artificial intelligence (AI), with a recent survey by Lloyds Bank revealing that nearly 60% of businesses are already utilising the technology. The survey indicates that 82% of early adopters have experienced a boost in productivity, with productivity being the primary driver for AI investment at 46%. Over half of the firms plan to invest in AI over the next year, while a quarter of non-adopters are considering its implementation. However, challenges remain, with 42% citing technology costs as a barrier. The UK AI market is projected to significantly contribute to the economy, with Microsoft estimating a potential £550bn increase in GDP by 2035.
Higher defence spending makes tax hikes ‘inevitable’
Sir Keir Starmer’s commitment to increase defence spending to 5% of GDP by 2035 may necessitate significant tax hikes, warns Paul Johnson, director of the Institute for Fiscal Studies (IFS). The Government plans to allocate 3.5% of GDP to defence, with an additional 1.5% for related areas, ahead of a NATO summit. Johnson stated: “If spending goes only one way then so, inevitably, will tax.” Labour ministers are exploring tax options after ruling out increases to income tax, VAT, and national insurance contributions.
Labour’s tax hikes threaten creative industries
Labour’s recent creative industries sector plan has raised concerns about the future of the UK’s thriving creative sector, which generates over £100bn annually and supports millions of jobs. Stuart Andrew, Shadow Culture Secretary, argues in the Express that Labour’s “Jobs Tax” and increased Business Rates are detrimental to creative businesses, threatening their survival and job creation. He highlights that while the Conservatives supported the sector with over £1bn in tax reliefs and initiatives like the Culture Recovery Fund, Labour has introduced £2.8bn in new costs and anti-business regulations. Andrew warns that Labour’s policies risk undermining decades of success in the creative industries, stating: “We can’t let short-term thinking and high-tax ideology destroy decades of success.”
UK to lose more millionaires than any other country
According to the latest Wealth Migration Report by Henley & Partners, the UK is projected to lose 16,500 millionaires in 2025, more than any other country. The increase from last year’s forecast of 9,500 is attributed to punitive tax hikes and a stagnant economy. Dr Juerg Steffen, chief executive of Henley & Partners, said: “This isn’t just about changes to the tax regime. It reflects a deepening perception among the wealthy that greater opportunity, freedom, and stability lie elsewhere.” The report highlights that the UK will also experience the highest combined wealth loss from departing millionaires, raising concerns about the long-term economic implications for the country. Recent tax increases, including changes to capital gains tax and the abolition of the non-dom regime, are accelerating this trend, prompting discussions within the Treasury about potential policy reversals to retain high-net-worth individuals.
Farmers call for judicial review of tax raid
A group of farmers and business owners is pursuing a judicial review of the Government’s controversial inheritance tax changes, claiming a lack of public consultation prior to the policy’s implementation. The claim, submitted to Chancellor Rachel Reeves and HMRC, does not seek to reverse the changes but argues that the Government failed to meet its public law obligations regarding significant tax policy shifts. The Chancellor’s decision to tighten exemptions for Agricultural Property Relief and Business Property Relief, capping the tax-free threshold at £1m, has sparked widespread protests. James Austen, a partner at Collyer Bristow, said: “The Government should be held to its public law obligations on matters of tax policy.” The legal action follows a similar case dismissed by the High Court earlier this month.
Markets
Yesterday, the FTSE 100 closed flat at 8758.99 and the Euro Stoxx 50 closed up 1.44% at 5297.07 as investors reacted to the news of an Israel Iran ceasefire. Overnight in the US the S&P 500 rose 1.11% to 6092.18 and the NASDAQ rose 1.43% to 19912.54.
US Federal Reserve Chair Jerome Powell indicated that he is in no hurry to cut interest rates as central bank officials wait for the impact of tariffs on inflation to play out.
This morning on currencies, the pound is currently worth $1.362 and €1.174. On Commodities, Oil (Brent) is at $68.25 & Gold is at $3327. On the stock markets, the FTSE 100 is currently up 0.34% at 8789 and the Eurostoxx 50 is up 0.21% at 5308.
BRC faces backlash over fake M&S sales data
The British Retail Consortium (BRC) has come under fire for publishing “made up” sales figures for Marks & Spencer (M&S) following a cyber-attack that disrupted the retailer’s operations. The BRC used outdated figures as placeholders instead of excluding M&S from its BRC-KPMG benchmark, which is vital for assessing retail performance. This decision has raised concerns about the integrity of the benchmark, with Richard Lim, chief executive of Retail Economics, warning that it could mislead retailers in their strategic decisions. M&S has reported a significant sales decline due to the attack, projecting a £300m hit to profits. The BRC defends its actions, stating that excluding M&S would have revealed sensitive market information.
BIS issues stark warning on stablecoins
The Bank for International Settlements (BIS) has issued a serious warning regarding the risks associated with stablecoins, urging countries to accelerate the tokenisation of their currencies. The BIS highlighted concerns such as the potential for stablecoins to undermine monetary sovereignty and the risk of capital flight from emerging markets. “Stablecoins as a form of sound money fall short, and without regulation pose a risk to financial stability and monetary sovereignty,” the BIS stated in an early chapter of its annual report. The BIS advocates for a tokenised “unified ledger” system that integrates central bank reserves and commercial bank deposits, aiming to enhance payment efficiency and transparency.
Interest-only mortgages set to make a comeback
The Financial Conduct Authority (FCA) is reconsidering interest-only mortgages, previously labelled a “ticking timebomb,” as a potential means to support home ownership. In a recent discussion paper, the FCA expressed interest in whether its regulations could facilitate more interest-only options, stating: “Interest-only mortgages could be suitable for consumers who may struggle to afford a repayment mortgage.” While these loans made up only 4.5% of regulated mortgage sales in 2024, down from 39% in 2007, they are still available, primarily for buy-to-let landlords and higher-earning professionals. Despite their controversial past, some experts argue that these mortgages can be beneficial for certain borrowers. The FCA is exploring ways to allow borrowers to switch between repayment and interest-only options more easily and will also consider reforms that could allow renters to use their rental payment history as proof of their ability to afford a mortgage.
Labour rebels threaten welfare reforms
Over 100 Labour MPs have signed a Commons amendment to halt the Government’s welfare reform Bill, which, if passed, would effectively kill the legislation. The amendment, which calls for a decline in scrutiny of the Bill, highlights concerns that “250,000 people will be pushed into poverty as a result of these provisions, including 50,000 children.” Notably, there has been no formal consultation with disabled individuals affected by the changes. Labour MPs, including Dame Meg Hillier and Debbie Abrahams, are urging the Government to reconsider the Bill before proceeding. Work and Pensions Secretary Liz Kendall defended the reforms, stating they are “rooted in fairness” and aimed at ensuring the survival of the welfare state. Sir Keir Starmer also defended the bill arguing that the welfare system needed reform and was “not working for anyone”.
Babcock
Babcock International said it stands to benefit from a “new era for defence”, as it upped its medium-term ambitions, raised its dividend and announced a share buyback. The aerospace, defence and nuclear engineering services company reported pretax profit of £329.1 million in the year to March 31, surging 52% from £216.7 million. Revenue was 11% higher at £4.83 billion from £4.39 billion, growth it said was driven by Nuclear and Marine. At constant currency, Marine revenue increased 12%, Nuclear rose 19%, while Land increased 2%. Aviation revenue declined 4% at constant currency.
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Why you should become a member of CPA!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have supported our members through all sorts of difficult trading environments. With high interest rates and a struggling economy and elevated insolvencies, our services can help your business navigate these difficult waters.
Unlike other credit management and debt collection companies, we offer a range of services to our members that are all included as part of a fixed annual subscription, tailored to your needs.
Under your annual subscription you will have access to our main services:
- Our Creditcare credit reports provide credit ratings and limits along with a host of detailed information on your potential customers to enable you to trade with confidence and set appropriate credit policies for new customers.
- Our monitoring service will alert you to any significant changes in the status of those customers.
- Our Overdue account recovery service can be used to chase up payment on any invoices to those customers that have not been paid on time. Unlike other debt collection companies, this service directs your customer to pay direct to you and allows you to maintain your goodwill with them, rather than inserting ourselves into your relationship with you customer and insisting they pay CPA instead. Our Overdue account recovery service resolves over 80% of accounts referred to us.
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CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers and be warned of any potential risks. CPA has been improving business cash flow for over 100 years, by tackling late payers and campaigning against the late payment culture in the UK.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the value of their debts maybe!
Rather than to borrowing more money to improve your cashflow, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cashflow, then talk to CPA about how we can help you reduce those late payments.
Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
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Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
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Check our compensation calculator to see how much your business could be owed!
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