Business news 5 January 2026

The UK economy begins 2026 under a complex mix of optimism and caution. The FTSE 100 briefly breached the symbolic 10,000-point mark, signalling international investor interest, while broader business confidence remains subdued. Rising costs from tax changes, National Insurance hikes, and higher minimum wages are already reshaping employment and corporate strategies, with analysts warning of a potential uptick in insolvencies across retail, hospitality, and leisure sectors. Meanwhile, innovation and technology provide a glimmer of hope: AI and renewable energy are driving growth, while the EV market sees a dramatic reshuffle as China’s BYD overtakes Tesla in global sales.

James Salmon, Operations Director.

UK Economic Overview

Taxation and Worker Impacts

The Centre for Policy Studies (CPS) has highlighted what it calls “stealth taxation” in the recent Budget. Chancellor Rachel Reeves’ decision to freeze income tax thresholds until 2031 is expected to push nearly 1.7 million workers into higher tax brackets, generating an estimated £8 billion annually by 2029. While pensioners and benefit recipients may see modest income gains, the CPS warns this represents fiscal drag on working households.

Businesses are adjusting to new tax rules as well. Changes classifying double-cab pick-ups as cars for tax purposes are forcing firms to rethink fleet strategies, with Deloitte warning of potentially significant cost increases for employees.

Labour Market Pressures

Rising employment costs are contributing to underemployment and a slowing hiring environment. Hospitality and service sectors report frozen hiring and reduced hours, pushing underemployment to 8.1% in September 2025. The overall UK unemployment rate reached 5.1% in October, narrowing the gap with EU averages for the first time in over a decade.

Business Confidence

Business sentiment remains weak, with only 46% of UK companies expecting increased sales in 2026. Rising labour costs and tax pressures are cited as primary concerns, particularly among SMEs. Retailers brace for a challenging post-Christmas period, with Begbies Traynor reporting a 16.7% increase in companies in critical financial distress compared to last year.

Housing Market Trends

The UK housing market showed muted growth in 2025. Nationwide reports a 0.6% annual increase, with December prices slipping 0.4% to £271,068. Despite this, affordability improved as earnings growth outpaced house prices, leading to an 18% increase in first-time buyer mortgage transactions.

Productivity and Corporate Restructuring

The Resolution Foundation warns that 2026 could be a turning point for UK productivity, but expects short-term pain from the collapse of struggling “zombie” firms. Rising interest rates, energy costs, and higher minimum wages are likely to force inefficient businesses to exit the market, creating opportunities for more productive replacements.

Market Summary

Equity Markets

• FTSE 100: Peaked above 10,000 before settling at 9,983.51.
• Euro Stoxx 50: Up 0.9%, driven by defense stock rallies following the US ouster of Venezuelan President Nicolás Maduro.
• S&P 500 and NASDAQ: Tech stocks weighed on Friday trading, while energy, materials, and utilities performed strongly.

Commodity Markets

• Oil: Brent and WTI fell slightly on geopolitical developments and potential future supply increases from Venezuela.
• Precious Metals: Gold and silver extended gains, benefiting from haven demand amid geopolitical tensions.
• Base Metals: Copper surged toward record highs on supply concerns and a risk-on mood in markets.

Currency Markets

• GBP/USD: Trading at $1.343, down 0.19% as geopolitical tensions lifted the US dollar.
• GBP/EUR: Slightly up at €1.1489, while EUR/GBP moved toward 0.8700 due to ongoing Ukraine-Russia tensions.

Geopolitical developments remain the dominant market driver, with the US strike on Venezuela, ongoing EU relations, and global trade concerns shaping sentiment across equity, commodity, and currency markets.

Technology and Innovation Highlights

• Artificial Intelligence: PwC estimates AI could contribute £2 billion to UK GDP in 2026, rising to £23 billion by 2032, potentially driving 43% of GDP growth over the next decade.
• Electric Vehicles: BYD overtook Tesla as the world’s top EV seller in 2025, delivering 2.26 million units globally compared to Tesla’s 1.64 million. Investors are increasingly focused on Tesla’s AI and robotics ventures.
• Renewables: 2025 saw the UK record its warmest and sunniest year ever, producing over 18.5 terawatt-hours of solar energy, a 30% increase over 2024.

Policy and Political Updates

• EU Alignment: Prime Minister Keir Starmer signalled potential for closer UK alignment with the EU single market, emphasizing national interest while ruling out full free movement or rejoining the customs union.
• Business Regulation: Greg Jackson of Octopus Energy warns that excessive bureaucracy and investor caution hinder young firms.
• Wealth Tax Sentiment: Lord Egremont called for wealthy individuals to accept higher taxation without complaint.
• MTD Reforms: Around 864,000 sole traders will need to comply with Making Tax Digital for income tax this year, though awareness remains low.

Corporate Insolvencies and Administration Updates

2026 has started with notable corporate distress across sectors:

Pre-pack Administrations

• TGI Fridays: Plans to close 15–20 UK restaurants, affecting hundreds of staff.

Winding-up Orders and Petitions

• Eden Electrical Ltd – Petition to wind up
• Grovereeve SJW Ltd – Petition to wind up
• Peacock Computers Ltd – Winding-up order
• Trade Right International C.I.C – Petition to wind up
• E-Let Properties Ltd – Winding-up order
• Additional petitions filed for: HMS (883) Ltd, TYA Two Grp Ltd, Poros Trading Ltd, A2Z Top Clean Launderette Ltd, Coro Chocolate Ltd, Premier-Lettings (UK) Ltd, Denlab Ltd, Maycare Ltd, NC Opco Ltd, UAL Bar & Restaurants Ltd, RD Offices Number 4 Ltd, MDK Outsourcing Ltd

Appointments of Liquidators

• PT Tech Europe, Ltd
• Facial Line Softening Ltd
• Bio Search (N.I.) Ltd
• Ballykine Structural Engineers Ltd
• Watchandtrade Ltd
• Homecare Software Solutions Ltd
• CPC Office Supplies Ltd
• Corner Flag Management Ltd
• Hanling Properties Ltd
• Daverlin Ltd & Daverlin Holdings Ltd
• Commercial Leisure Supplies Ltd
• S. and G.L. Aswat and Sons Ltd
• Ministry of CRM Ltd
• Onsite Analysis Ltd
• DM Holden Developments Ltd
• Byone Software Technologies Ltd
• Planning Services (UK) Ltd
• Martin Bunzl International Ltd
• Gemini PMO Services Ltd
• Integrated Micro-Electronics UK Ltd.
• Jafton Properties Ltd

Appointment of Administrators

• Fosse Sil WY Ltd

Analysts note that sectors such as retail, hospitality, and leisure are particularly exposed, with rising operating costs and tighter household budgets intensifying pressures.

Closing Outlook

The UK economy enters 2026 at a crossroads. Rising insolvencies, labour cost pressures, and demographic challenges weigh heavily on growth prospects. At the same time, technological innovation, renewable energy expansion, and evolving market dynamics provide opportunities for forward-looking businesses and investors. Navigating this environment will require careful planning, adaptability, and a keen eye on both domestic policies and global events.

CPA can help with cash flow and credit management. Just call Peter Uwins, CPA’s National Sales Manager, on️ 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.

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