UK Business News Today: 13 August 2026 | Economy, Markets & Insolvencies

The UK economy continued to grow in the second quarter, helped by resilient consumer spending, stronger business investment, World Cup activity and unusually hot summer weather. However, the outlook for SMEs remains complicated: employment reforms could impose billions of pounds of additional costs, the Iran conflict continues to threaten energy prices and inflation, industrial activity is weakening and businesses face further uncertainty ahead of the October Budget. For companies selling on credit, the mixture of growth and rising costs makes careful customer monitoring, disciplined credit control and prompt action on overdue invoices increasingly important.

James Salmon, Operations Director.

Key Developments

• UK GDP grew 0.4% in the second quarter and 1.2% year-on-year, with June alone delivering stronger-than-expected 0.3% growth.
• Proposed restrictions on zero-hours contracts could cost businesses as much as £2.9bn a year.
• Treasury modelling suggests prolonged disruption in the Strait of Hormuz could reduce UK growth to just 0.3% in 2027 and push inflation as high as 4.3%.
• UK industrial and manufacturing output weakened in June even as services remained resilient.
• Global markets were supported by softer US inflation and renewed enthusiasm for AI-related technology stocks, although oil, gold and other commodities moved lower.

Economy & Policy

UK economy grows 0.4% as summer sun and World Cup provide a boost

The UK economy expanded by 0.4% between April and June, slowing from 0.6% growth in the first quarter but matching economists’ expectations. GDP was 1.2% higher than a year earlier, while June delivered a stronger-than-expected 0.3% monthly increase rather than the decline economists had forecast. Services were the main engine of growth, with businesses in hospitality, retail, accommodation and entertainment reporting benefits from hot weather and World Cup football.

Computer programming grew 3.7%, advertising and market research expanded 4.3% and scientific research and development increased 3.9%. Private consumption rose 0.3% quarter-on-quarter, gross fixed capital formation increased 1.2% and business investment advanced 1.7%. Exports and imports both rose 0.5%, while government spending fell 0.3%.

The figures suggest the economy has proved more resilient than feared following the energy shock caused by the Iran conflict. However, economists continue to expect momentum to weaken in the second half of the year as higher energy costs, borrowing costs and Budget uncertainty feed through.

Why it matters: Growth is encouraging for SMEs, but weaker conditions later in the year could make customers more cautious about spending and slower to settle invoices.

Services outperform as industrial and manufacturing activity weakens

June’s underlying figures showed a marked divide between services and goods-producing industries. The index of services rose 0.4% month-on-month, beating expectations for no growth, while industrial production fell 0.2% and manufacturing output declined 0.5%.

On an annual basis, industrial production was down 0.2%, compared with 1.0% growth previously, while manufacturing production grew just 0.5%, well below the 1.2% forecast. Construction output fell 0.1% on the month and 2.3% year-on-year.

The UK’s total trade deficit also widened to £5.54bn, compared with expectations for a £2.7bn deficit. Excluding precious metals, the deficit stood at £3.58bn.

Why it matters: Suppliers to manufacturing, construction and industrial customers should pay particular attention to order pipelines and payment behaviour as weaker output can quickly translate into cashflow pressure.

Iran war could push UK growth down to 0.3% next year

Treasury modelling reportedly suggests that UK growth could slow to just 0.3% in 2027 if disruption to shipping and energy supplies through the Strait of Hormuz persists. The same modelling suggests inflation could rise from 2.6% to a peak of around 4.3% early next year.

The conflict has already affected energy markets and contributed to a 13% rise in Britain’s energy price cap in July. A prolonged disruption would make life more difficult for both households and businesses while potentially limiting the Bank of England’s ability to reduce interest rates.

Prime Minister Andy Burnham has put easing living costs at the centre of his government, but sustained energy disruption would make that objective considerably harder.

UK could eventually spend a fifth of tax revenue servicing debt

New modelling from the Institute for Public Policy Research suggests debt interest could absorb 21.3% of total government revenue by 2075 under its central scenario. In a more severe scenario, that proportion could rise as high as 47%.

Current debt interest payments are projected at around £110bn, nearly twice the defence budget. The IPPR argues that future fiscal policy should be assessed more closely against the proportion of tax revenue required simply to service government debt.

Scotland’s public spending deficit falls

Scotland’s public spending deficit fell by £600m to £25.3bn last year, according to the latest Government Expenditure and Revenue Scotland report. Tax revenues increased 6.9% to £98.3bn, while expenditure rose 4.8% to £123.6bn.

Revenue from national insurance contributions and income tax increased strongly, although North Sea oil and gas receipts fell for a third consecutive year to £3.9bn. Public spending per person in Scotland stood at £22,281, around £2,720 above the UK average.

Employment & Labour

Zero-hours contract reforms could cost businesses up to £2.9bn a year

The Government’s proposed restrictions on zero-hours contracts could cost employers between £350m and £2.9bn annually, depending on the threshold eventually chosen for guaranteed hours.

Government analysis suggests around £1.2bn of the cost could come from new requirements to compensate workers when shifts are cancelled. The British Chambers of Commerce says the figures are considerably higher than earlier estimates for the wider employment reform package.

The BCC and CBI are calling for negotiations between government, employers and unions before the measures are implemented.

Tax & Government

Burnham considers further business rates relief

Prime Minister Andy Burnham says he will examine whether additional business rates relief can be introduced for high street businesses ahead of the Budget on 28 October.

Burnham announced 20% relief for pubs and similar venues after taking office but has acknowledged that the Government has limited room for manoeuvre on wider reform.

Business rates remain a significant fixed cost for retailers, hospitality businesses and other firms operating from commercial premises.

HMRC urges action after first Making Tax Digital quarterly deadline

The first Making Tax Digital quarterly update deadline passed on 7 August for affected sole traders and landlords with qualifying income above £50,000 in the 2024/25 tax year.

HMRC says businesses that missed the deadline should submit outstanding updates as quickly as possible. There will be no late-update penalties during the first tax year, but digital record-keeping and quarterly reporting requirements still apply.

The next quarterly update deadline is 7 November.

SME & Business Environment

Housing market weakens amid tax and Budget uncertainty

The UK housing market is experiencing renewed weakness, according to the Royal Institution of Chartered Surveyors. A net 28% of estate agents reported a fall in buyer inquiries, while 30% reported declining sales.

Higher mortgage rates, geopolitical uncertainty and speculation over possible tax changes ahead of the Budget have all weighed on confidence. Most agents expect prices and transaction activity to remain under pressure during the coming three months.

Southern Water customers face another bill increase

Southern Water could be allowed to increase average bills by a further £43 in 2027-28 under Ofwat’s latest draft decision. The additional revenue would contribute towards almost £750m of new investment, including water recycling infrastructure and new water sources.

Across England and Wales, 13 water companies have provisionally been allowed £3.39bn of additional expenditure by the end of the decade. Thames Water was granted £301m of the £307m it requested, while other utilities including Severn Trent and Wessex Water could also add modest amounts to customer bills.

The additional investment comes during an exceptionally dry summer in which more than 27 million people have been subject to hosepipe restrictions.

Retailers reject accusations of profiteering

Around 70% of respondents to a City AM/Freshwater Strategy poll believe supermarkets are making excessive profits from food price increases linked to the Iran conflict.

Chancellor John Healey said he had seen no evidence of profiteering but warned that regulators could intervene if unjustified increases occurred. The British Retail Consortium rejected the accusations and highlighted the industry’s low margins, saying grocers typically make around 3p of profit for every £1 of sales.

Food retailers continue to face pressure from energy, wage, transport and supply-chain costs.

Professional jobs forecast to shift away from London

Robert Walters forecasts that as many as 90,000 banking, legal and accountancy roles could move out of London by 2031 as employers respond to high living costs and policies designed to support regional economic growth.

Manchester, Leeds and Birmingham are expected to absorb more than half of these positions. The North West alone could gain between 15,000 and 22,500 jobs, potentially adding around £2.3bn to the regional economy.

Across the UK regions, the shift could contribute approximately £9bn in additional economic activity.

Farage expected to retain Clacton seat

Nigel Farage is seeking re-election in Clacton and is expected to win comfortably after other major political parties opted not to contest the seat. Satirical candidate Count Binface is his most visible challenger, with polling suggesting Farage could secure close to three-quarters of the vote.

Despite the likely victory, commentators have pointed to possible “Farage fatigue” and growing competitive pressure on Reform UK ahead of the next general election.

Energy & Costs

Heatwave peaks across southern England

Thursday marks the peak of the latest heatwave, with an amber warning for extreme heat affecting Greater London and other parts of southern England. Temperatures in London are expected to reach around 34°C, with some parts of eastern, southeastern and central England potentially reaching 37°C or 38°C.

The heat is forecast to ease gradually. London is expected to reach around 31°C on Friday, before dropping to around 24°C on Saturday and Sunday and 25°C on Monday.

Businesses may face disruption to transport, deliveries, outdoor working and heat-sensitive equipment, while hospitality and leisure operators may see increased demand.

London forecast: Thursday to Monday

• Thursday: Sunny and extremely hot, around 34°C.
• Friday: Sunny and very warm, around 31°C.
• Saturday: Cooler with some sunshine before increasing cloud, around 24°C.
• Sunday: Pleasant with variable cloud and sunny spells, around 24°C.
• Monday: Partly sunny and comfortable, around 25°C.

International & Trade

US inflation eases and reduces rate-hike expectations

US annual inflation slowed from 3.5% in June to 3.4% in July, matching expectations. Core inflation, excluding food and energy, eased from 2.6% to 2.5%.

The figures reduced immediate expectations that Federal Reserve officials will need to raise rates again, although policymakers remain focused on inflation risks arising from energy costs and the wider global economy.

Foxconn profits jump 35% on AI demand

Taiwanese electronics manufacturer Foxconn reported second-quarter profit of NT$60bn, approximately $1.86bn, representing a 35% increase from a year earlier.

Cloud-computing infrastructure and networking products, including AI servers, accounted for more than half of quarterly revenue for the first time. The company expects strong AI demand to continue supporting growth through the remainder of 2026.

South Korea’s KOSPI enters bull market

South Korea’s KOSPI surged more than 3.5% as Samsung Electronics and SK Hynix rallied on continued enthusiasm for AI semiconductor demand.

The index has now risen more than 20% from its 30 July low, meeting the conventional definition of a bull market. Strong earnings and continued commitments to AI infrastructure spending have boosted confidence in Asian technology manufacturers.

Norway’s sovereign wealth fund reports record profit

Norway’s $2.34tn sovereign wealth fund reported a record first-half profit of more than $184bn and a return of 9.4%.

The fund benefited significantly from the rally in Asian technology shares. Norges Bank Investment Management holds stakes in more than 7,000 businesses across over 50 countries and owns roughly 1.5% of globally listed equities.

Global Market Summary

Global markets were broadly positive on Thursday morning after July’s US inflation figures reduced immediate fears of another Federal Reserve rate rise. Asian technology shares were particularly strong, while European markets opened mostly higher. The UK was the exception, with the FTSE 100 weighed down by energy shares and currency movements despite better-than-expected UK GDP figures.

Major equity markets

• FTSE 100: 10,803, down 0.28% on Thursday morning.
• STOXX Europe 600: 660.96, up 0.22%.
• Euro STOXX 50: 6,573, up 0.60%.
• DAX: 26,459, up 0.49%.
• CAC 40: 8,707, up 0.37%.
• S&P 500: closed Wednesday at 7,748.50, up 0.3%.
• Dow Jones: closed at 53,770.27, down slightly by less than 0.1%.
• Nasdaq Composite: closed at 26,588.49, up 0.5%.
• Nikkei 225: 68,309, up 1.16%.
• Hang Seng: 25,397, down 0.17%.

South Korea was the standout market, with the KOSPI climbing around 3.6% as semiconductor stocks rallied. Samsung Electronics and SK Hynix benefited from renewed confidence in AI-related demand.

Market drivers

The main support for equities came from US inflation. July CPI came in broadly as expected, reducing concern that the Federal Reserve would need to raise rates in September. That helped Treasury yields ease and supported technology stocks.

AI remained another major theme. Strong results from Foxconn, Lenovo and other hardware businesses reinforced expectations that spending on AI infrastructure remains strong. Nvidia rose around 3% during Wednesday’s US session.

Not every AI-related company benefited. Cisco shares fell around 6.4% in pre-market trading despite better-than-expected quarterly earnings after its AI revenue guidance disappointed investors.

UK GDP also influenced markets. Q2 growth of 0.4% and June’s 0.3% monthly expansion demonstrated greater resilience than expected, although stronger growth could make the Bank of England more cautious about reducing interest rates.

Japan remains another source of policy uncertainty, with reports suggesting the government would support a Bank of Japan rate increase in September or October.

Geopolitical risk remains centred on Iran and the Strait of Hormuz. The International Energy Agency has warned that prolonged disruption could reduce global oil supply substantially, although part of the recent geopolitical premium came out of crude prices on Thursday morning.

Currencies

Sterling traded around $1.3486 against the US dollar.

Against the euro, £1 bought approximately €1.170, based on EUR/GBP at 0.8550.

Currency movements were relatively modest despite the UK GDP figures. The dollar index was broadly unchanged at 99.96, while the yen gained limited support from expectations that the Bank of Japan could tighten policy.

Commodities

Oil prices moved sharply lower on Thursday morning after a strong run driven by Middle East tensions.

• Brent crude: $87.12 a barrel, down 2.09%.
• WTI crude: $81.48 a barrel, down 2.16%.
• Gold: $4,381.75 an ounce, down 0.60%.

Silver fell 1.11% and copper declined 1.10%.

The decline in crude reflects some reduction in the immediate geopolitical risk premium, although the Strait of Hormuz remains a major uncertainty for global energy markets.

For business owners, oil prices remain especially important because sustained increases feed directly into transport, production and energy costs. Gold’s continued elevated level also indicates that investors remain willing to pay for protection against political and economic risk.

Insolvency Watch

Administrations (4)

• GENIUSTO (UK) LTD
• JMG ELECTRICAL LTD
• MBJSC (HOLDINGS) LIMITED
• RJDS 1 LTD

Liquidations (9)

• ADAPTIVE TECH LTD
• B J MATTHEWS PROPERTIES LIMITED
• JEMLYN LIMITED
• JUICE ARCHITECTS LIMITED
• LAW 873 LIMITED
• MEADOWGATE TECHNOLOGY SOLUTIONS LIMITED
• NAPP PENSION TRUSTEES LIMITED
• NORTHERN ACCOUNTANTS (HULL) LTD
• VIXAL SYSTEMS LTD

Protecting cashflow while the economy sends mixed signals

Today’s figures capture the challenge facing many businesses: the economy is still growing, but costs, interest-rate uncertainty and sector-specific weakness remain significant.

A customer can look healthy while conditions are improving and still become a payment risk when margins are squeezed. That is why the quality of credit control matters as much during periods of growth as it does during downturns.

CPA can help businesses strengthen that process through CreditCare credit reports, customer and debtor monitoring, structured credit control support and professional recovery of overdue accounts. Acting early can improve payment performance while preserving the commercial relationships businesses depend upon.

CPA’s approach is designed around a simple principle: improving cashflow while protecting relationships.

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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