UK Business News Today: 1 July 2026 | Economy & Markets

July begins with UK businesses facing a familiar mix of weak growth, fragile confidence, rising costs and policy uncertainty, while the English summer continues to put pressure on operations, staffing and customer demand. The Bank of England is weighing softer growth against renewed inflation risks, while tax rumours, defence spending pressures and packaging costs are adding to concerns about future margins. At the same time, England’s World Cup match against DR Congo at 5pm could bring an early finish for many workplaces and a useful boost for pubs, supermarkets and retailers, reminding SMEs that cashflow can be affected by both economic pressure and sudden shifts in trading patterns.

James Salmon, Operations Director.

Key Developments

• UK business confidence weakened sharply in June, with the IoD sentiment index falling to minus 61.
• Bank of England Governor Andrew Bailey said two rate cuts this year had looked reasonable before the US-Iran war lifted inflation risks.
• Hospitality businesses renewed calls for a VAT cut as almost a quarter of venues reportedly operate at a loss.
• England’s World Cup match against DR Congo could bring early closures but also a sales lift for pubs, supermarkets and retailers.
• Heatwave conditions remain a practical risk for staffing, productivity, transport and customer footfall.

Economy & Policy

UK growth disappoints as household incomes fall

The UK economy grew by only 0.1% at the end of 2025, revised down from an earlier estimate of 0.2%, according to the Office for National Statistics. Growth in the first quarter of 2026 was stronger at 0.6%, but economists have warned this may prove short-lived after GDP fell by 0.1% in April. Inflation remains above target at 2.8%, while real household disposable income fell by 0.8% in the first quarter as rising prices and higher taxes squeezed consumers. The figures point to a fragile economy where businesses may find it harder to pass on costs or rely on steady demand.

Why it matters: Weak growth and falling household income can increase payment delays, reduce discretionary spending and make customers more cautious about taking on new credit.

Business confidence takes a hit

Business confidence declined sharply in June, with the Institute of Directors reporting that its sentiment index fell to minus 61 from minus 53 in May. Revenue expectations also weakened, with the relevant sub-index falling to 11 from 27, its lowest reading this year. Anna Leach, the IoD’s chief economist, said overall operating conditions worsened in June despite a fragile peace in the Middle East. Energy and fuel costs remain a major concern, with 72% of businesses reporting increases and a fifth facing rises of at least 25%.

Why it matters: Falling confidence often leads businesses to delay investment, tighten spending and become slower or more selective in paying suppliers.

Bailey says BoE was on track for two rate cuts before inflation shock

Bank of England Governor Andrew Bailey said market pricing for two UK interest rate cuts this year was “not unreasonable” before the US-Iran war pushed up energy prices and inflation risks. Speaking in Sintra, Bailey said the energy shock had been frustrating for policymakers, but stressed that the Bank was operating against a softer economy. Inflation is expected to rise to around 3.2% later this year, though Bailey said the Bank’s remit requires it to judge inflation two to three years ahead. That keeps the interest rate outlook finely balanced between weak growth and renewed price pressure.

Bailey insists the Bank is not complacent about inflation

Bailey has also said he is “not happy” that inflation remains above the Bank’s 2% target. He backed chief economist Huw Pill’s concern that persistent inflation is problematic, even as the Bank recently held rates at 3.75%. With CPI at 2.8% and forecasts suggesting a possible rise to 3.2%, businesses face continued uncertainty over prices, wages and finance costs. The Bank is trying to avoid cutting too quickly while still recognising that the economy is softening.

Tax & Government

Labour tax rumours could unsettle the economy again

Andy Burnham, the leading candidate for Labour leader, has been linked with plans to replace council tax with a Land Value Tax. Such a change would shift the basis of taxation from property value to land value and could affect homeowners, especially in high-value areas. Other possible tax changes reportedly being discussed include higher capital gains tax and an “exit tax” to deter entrepreneurs from leaving the UK to avoid higher charges. Anna Leach of the Institute of Directors warned that another summer of speculation over tax changes risks damaging growth.

TUC pushes for major bank tax hike

The Trades Union Congress is urging Andy Burnham to introduce a major windfall tax on banks. The proposal could raise between £9bn and £60bn over four years, according to estimates cited in the report. UK Finance has warned that such measures could damage the City’s competitiveness and lead to job losses. Lord Jim O’Neill, a former Goldman Sachs chief economist who is advising Burnham, has also cautioned against further taxes on business.

Starmer’s defence spending pledge highlights UK fiscal squeeze

Outgoing Prime Minister Keir Starmer has announced £15bn of additional defence spending over four years. The spending will partly be funded by shifting money away from other capital projects, including infrastructure schemes, raising concerns that more productive investment could be delayed. The pledge leaves defence spending on track to reach 2.7% of GDP by 2029, still below the 3% sought by former Defence Secretary John Healey and well short of NATO’s wider 3.5% target. Meeting that larger commitment could require around £30bn more in today’s prices, leaving Andy Burnham with difficult choices if he becomes prime minister.

Unfunded defence plan poses challenge for Burnham

Starmer’s wider £298bn defence investment plan could leave Andy Burnham facing a £4.7bn funding gap in his first budget. Conservatives have described the plan as a delayed-action problem for Starmer’s successor, while some in Burnham’s circle have floated the idea of war bonds. Starmer has pushed back on that proposal, arguing that defence bonds are still debt, a view markets are likely to share. The broader issue is that any new spending promises will require a credible funding plan.

Treasury removed numeracy test to boost diversity

The Treasury removed a numerical reasoning test from its graduate scheme in 2020 after a review suggested it had an adverse impact on candidate diversity. The change reportedly increased the diversity of successful applicants, but critics have argued that removing the test weakened basic competency checks. The issue has drawn renewed attention because Dr Zubir Ahmed, reportedly under consideration for a senior role under Andy Burnham, criticised the move. For businesses, the story is less about recruitment process detail and more about confidence in public-sector capability.

Costs, Inflation & Regulation

Packaging tax could raise food prices

Retailers and manufacturers have warned that the Government’s Extended Producer Responsibility packaging scheme could push up food prices and increase business costs. Labour MP Sarah Champion is leading a parliamentary debate calling for the policy to be scrapped, arguing it is poorly designed and could damage jobs, especially in sectors such as glass manufacturing. The British Retail Consortium estimates the scheme will cost retailers £1.6bn this year and add 0.5% to food inflation. Environment minister Mary Creagh defended the policy, saying it shifts recycling costs from taxpayers to producers and encourages sustainable packaging.

Hospitality sector renews call for VAT cut

Restaurants, pubs and bars have renewed calls for a reduction in VAT after new figures showed almost a quarter of venues are operating at a loss. Under the “VAT’s the problem” campaign, hospitality leaders including Tom Kerridge are urging the Government to cut VAT from 20% to 10%. Trade bodies say rising labour, energy and inflation costs are placing unsustainable pressure on the sector, with one in six venues warning they could close within a year. Supporters argue a VAT cut would help protect jobs and high street businesses.

European heatwave disrupts business and public services

Europe has been sweltering under a severe heatwave, with roads melting in France and disruption in Britain including school closures and cancelled hospital appointments. Many European buildings, transport systems and workplaces are poorly designed for sustained high temperatures. The health and productivity impact can differ sharply by region, with 30°C in Manchester presenting different risks from 30°C in Madrid. Temperatures above 30°C are forecast to return this weekend, keeping heat risk on the agenda for employers and customer-facing businesses.

Housing & Consumers

UK house prices flat for second month despite annual growth

Nationwide figures show UK house prices failed to grow for a second straight month in June, with the average property price flat at £277,484. Annual house price inflation rose to 2.2% from 1.7% in May, while seasonally adjusted monthly prices were broadly unchanged after a 0.6% fall in the previous month. Mortgage rates have cooled from April highs and may fall further if expectations for Bank of England rate hikes retreat. The figures also point to a continuing North-South split in house price performance.

Industry, Technology & Investment

New digital ID plan could boost UK economy

The City of London Corporation has proposed a digital identity framework that could unlock more than £5bn for the UK economy. The Digital Verification Orchestrator would allow consumers to reuse verified information across financial services, reducing duplication and speeding up checks. Developed with EY, Hogan Lovells and input from the Financial Conduct Authority, the model could generate £1.8bn and reduce fraud losses by £3bn over five years. Chris Hayward said the need for secure, reliable identity verification has never been greater.

UK could intervene in Paramount Skydance’s Warner Bros Discovery takeover

The UK could intervene in Paramount Skydance’s $81bn takeover of Warner Bros Discovery on public interest grounds. Culture Secretary Lisa Nandy has written to the companies saying she is minded to intervene because of the need for sufficient plurality of views in UK news media. The companies have until 6 July to respond. If Nandy proceeds, Ofcom would be asked to assess the deal.

International & Trade

Spain to grant permits to around 1.1 million undocumented migrants

Spain is set to grant residency and work permits to around 1.1 million undocumented migrants under a scheme announced last year. The application deadline closed yesterday. Prime Minister Pedro Sánchez said Spain’s GDP could be 19% smaller by 2050 without immigration. The move highlights the growing economic importance of labour supply as European countries manage ageing populations and workforce shortages.

Trump earned more than $1bn from cryptocurrency ventures in 2025

Donald Trump earned more than $1bn from cryptocurrency ventures in 2025, according to a new disclosure. Around half reportedly came from token sales at his family’s crypto firm, World Liberty Financial, with another $1bn or so from property and other business interests. The White House said neither the president nor his family has engaged, or will engage, in conflicts of interest. The disclosure comes as Bitcoin has been falling and confidence in parts of the crypto market remains fragile.

Bitcoin falls below $60,000 again

Bitcoin has continued to fall and is again trading below $60,000. Capital flows into AI-related stocks, major IPOs and weaker confidence in cryptocurrencies have been cited as factors behind the decline. The move contrasts sharply with the strong quarter for US equities, particularly semiconductor and AI-related shares. For business owners, the story is another reminder that speculative assets can move quickly when investor sentiment shifts.

Retail, Leisure & World Cup Trading

England holds its breath as DR Congo match approaches

England face DR Congo tonight at 5pm in the World Cup, and many businesses may see staff and customers mentally clocking off early. France have already swept past Sweden 3-0, with Kylian Mbappé scoring twice and drawing level with Lionel Messi as the tournament’s top scorer. Norway and Mexico have also progressed, raising the stakes as England look to join them. A 5pm kick-off could mean early closures, altered shifts and a busy evening for pubs, food retailers and delivery businesses.

England run could deliver pub and retail boost

The British Beer and Pub Association estimates that an England run to the World Cup final could generate £275m in extra revenue for pubs and lead to 55m additional pints being sold. A long tournament run could also support supermarkets, BBQ food sales, takeaway demand and tech purchases as households prepare to watch matches. Possible future match-ups against Brazil or Argentina would further increase public attention. For hospitality businesses under pressure, the tournament could provide a valuable but temporary boost.

Global Market Summary

Markets start July cautiously after strong quarter

Global markets entered July with a more cautious tone after a strong finish to the second quarter. European equities closed Tuesday on a high, with the STOXX Europe 600 up 0.9% on the day and 2.5% over June, reaching record highs. The FTSE 100 rose around 0.5%, supported by miners and defence stocks, while the Euro STOXX 50 also advanced. The DAX and CAC 40 benefited from the wider European rally, helped by softer German and French inflation figures.

In the US, the S&P 500 rose 0.8% on Tuesday and recorded its strongest quarter in six years. Over the three months to 30 June, the S&P 500 gained 14.9% and the Nasdaq Composite rose 21.4%, driven heavily by semiconductor and AI-related stocks. The Nasdaq 100 rose 1.7% on Tuesday, while the Philadelphia Semiconductor Index posted its best quarter ever. However, the S&P 500 slipped 1.1% in June as investors diversified from technology into other sectors.

Asian markets were mixed overnight. Japan’s Nikkei 225 rose 0.6% to 70,474.96, supported by AI-related shares and a positive Tankan business sentiment survey, while the Topix gained 0.4% to 4,011.50. South Korea’s Kospi fell 2.0% to 8,303.41, led lower by Samsung Electronics, which fell 5.8%. China was mixed, with the Shanghai Composite up 0.4% to 4,112.45, while the CSI 300 fell 0.4% as investors rotated into defensive sectors. Australia’s S&P/ASX 200 fell 0.6% to 8,722.90 as bank shares weakened.

Index moves

• FTSE 100: Up approximately 0.5% on Tuesday, supported by miners and defence names.
• STOXX Europe 600: Up 0.9% on Tuesday and 2.5% across June, returning to record highs.
• STOXX Europe 50: Advanced with the wider European rally.
• DAX: Benefited from the broader European rally and softer German inflation.
• CAC 40: Supported by the European risk-on move and French inflation returning to the ECB’s 2% target.
• S&P 500: Up 0.8% on Tuesday; up 14.9% over the quarter.
• Dow Jones: Positive sentiment followed the wider US equity rally, though the main leadership came from technology and semiconductors.
• Nasdaq: Nasdaq Composite up 21.4% over the quarter; Nasdaq 100 up 1.7% on Tuesday.
• Nikkei 225: Up 0.6% to 70,474.96.
• Hang Seng: No specific Hang Seng figure was supplied in today’s market data.

Market drivers

The main drivers were AI enthusiasm, defence spending, inflation data, US rate expectations and improving traffic through the Strait of Hormuz. European defence stocks rose after the UK announced a £15bn boost to military spending and the EU approved a €3.9bn loan to Ukraine for drone procurement. BAE Systems and Babcock rose as much as 3.5%.

Technology remained a major theme, with ASML up 6.8% and semiconductor shares continuing to lead global markets. Basic resources also performed strongly, with European miners gaining as copper and base metals rose on optimism around US-Iran peace talks and the possibility of normalising shipping through Hormuz.

The key event for markets today is Fed Chair Kevin Warsh’s speech at the ECB’s Sintra symposium. Investors are now pricing a meaningful chance of a July US rate hike, with swaps indicating around a 36% probability of a 25 basis point move. That has strengthened the dollar, pushed US Treasury yields higher and made investors more cautious at the start of the new quarter.

For SMEs, the market message is mixed. Strong equity markets can support confidence and investment, but higher yields, stronger dollar conditions and renewed rate worries can raise financing costs and keep pressure on global supply chains.

Currencies

Sterling was little changed against the dollar on Tuesday and was among the stronger G10 performers on the day, though mainly because the broader backdrop was dominated by dollar strength. The dollar rose as US Treasury yields increased and traders priced in more Federal Reserve tightening risk. The euro weakened by around 0.2% overnight against the dollar, pressured by dollar strength and uncertainty over the ECB’s future rate path.

• GBP/USD: The dollar strengthened against sterling as markets priced in Fed tightening risk.
• GBP/EUR: The euro weakened against sterling amid ECB uncertainty and broader dollar-led market moves.

For UK businesses importing goods, a stronger dollar can raise costs for fuel, commodities and dollar-priced supplies. For exporters, currency volatility can affect pricing, margins and payment terms.

Commodities

Oil posted its biggest quarterly decline since 2020 as the impact of the Iran war faded faster than expected. On Tuesday, WTI settled 1.8% lower at around $70 a barrel, while Brent’s September contract settled near $73 a barrel. Oil steadied around those levels overnight as peace talks continued and Hormuz traffic recovered.

Morgan Stanley cut its Brent forecasts for the third and fourth quarters, citing faster-than-expected Hormuz normalisation and weaker Chinese demand. Goldman Sachs warned that the global oil market could move back into oversupply as the war’s impact fades. Russia also increased crude exports to a record 4.13m barrels a day in the four weeks to 28 June, adding to supply pressure.

• Brent crude: Around $73 a barrel after falling sharply.
• WTI crude: Around $70 a barrel after a 1.8% fall.
• Gold: Precious metals retreated overnight as the dollar strengthened and risk sentiment softened.

For SMEs, lower oil prices can eventually reduce fuel and transport pressure, but the benefit may be offset if the pound weakens or if energy volatility keeps suppliers cautious.

Insolvency Watch

No insolvency notices were available today.

Protecting cashflow when confidence is fragile

The start of July brings a clear message for businesses that sell on credit: uncertainty is still very much part of the trading environment. Weak growth, falling confidence, high operating costs, tax speculation, heat disruption and rate uncertainty can all change how quickly customers pay.

When customers are under pressure, payment behaviour can deteriorate gradually before it becomes obvious. Invoices may move from a few days late to several weeks overdue. Queries may take longer to resolve. Customers may delay payment because they are waiting to be paid themselves.

CPA helps businesses strengthen cashflow without damaging the relationships they rely on. CreditCare credit reports can help assess customer risk before credit is extended. Debtor monitoring can highlight Trading through the heat and hopechanging risk early. CPA’s overdue account recovery and credit control support can help businesses act promptly, professionally and ethically when invoices become overdue.

Early action matters. The older an invoice becomes, the harder it can be to recover in full. A clear process, consistent follow-up and professional escalation can protect cashflow while preserving goodwill.

Call CPA on 020 8846 0000 during business hours, Monday to Friday, 9am to 5pm.
Email PaidQuick@cpa.co.uk
Visit https://cpa.co.uk/contact-us/

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.

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