UK Business News Today: 24 August 2026 | Economy, Markets & Insolvencies

The UK economy is showing tentative signs of improvement, with private-sector activity expanding at its fastest pace in four months, but the underlying picture remains difficult for many SMEs. Retail sales fell in July, private-sector employment has now declined for 23 consecutive months, restaurant profits have dropped sharply and more than 53,000 businesses are reported to be in critical financial distress. At the same time, higher employment and energy costs, Government borrowing pressures, changing employment rules and renewed global trade tensions are creating further uncertainty. For businesses selling on credit, the contrast between improving headline growth and weakening margins reinforces the importance of monitoring customer risk, maintaining disciplined credit control and acting quickly when payments begin to slow.

James Salmon, Operations Director.

Key Developments

• UK private-sector activity rose to a four-month high, with the composite PMI increasing to 52.5, although employment continued to fall.
• UK retail sales volumes declined 0.5% in July, adding to concerns about pressure on consumer-facing businesses.
• Profits at Britain’s 100 largest restaurant groups fell 44% to £204m, despite higher revenues.
• Government borrowing unexpectedly reached £1.8bn in July, adding to speculation about difficult tax and spending decisions in the October Budget.
• BTG reports 53,756 UK businesses in critical financial distress, reinforcing the need for suppliers to monitor customers carefully.

SME & Business Environment

UK private-sector growth reaches four-month high

The UK private sector expanded at its fastest pace in four months during August, according to the latest S&P Global flash data. The composite PMI increased to 52.5 from 52.2 in July, comfortably beating the consensus forecast of 51.6 and moving further above the 50-point level that separates expansion from contraction. Services activity provided the main support, while manufacturing remained weaker.

The figures provide a more encouraging signal after recent evidence of softer consumer and business activity. PwC economist Jake Finney said the improvement could contribute to UK economic growth of a little above 1% for 2026.

However, the employment picture remains much weaker. Private-sector employment has now fallen for a record 23 consecutive months, while unemployment has increased from 4.4% to 4.9% since the middle of 2024. High employment costs, energy bills, employer National Insurance and the minimum wage continue to weigh on hiring decisions.

Why it matters: Stronger output is welcome, but continued job cuts and elevated costs suggest many customers may still be protecting cash rather than increasing spending or settling suppliers faster.

More businesses remain in critical financial distress

BTG’s latest Red Flag research reports that 53,756 UK businesses are in critical financial distress, an increase of 9%. Leisure and culture businesses recorded a 27.1% increase, while distress among hotels rose 26.6%.

Julie Palmer of BTG described the continuing level of critical and significant distress as evidence that businesses are “walking a tightrope”. Rising energy costs, inflationary pressure and elevated borrowing costs remain key concerns.

We highlighted these figures on Friday, but they remain particularly relevant alongside today’s evidence of squeezed hospitality margins, weaker retail demand and falling private-sector employment.

Why it matters: Financial distress is often accompanied by progressively slower supplier payments before formal insolvency occurs, making early warning information and active debtor monitoring particularly important.

Nearly half of taxpayers miss first MTD deadline

Almost half of taxpayers eligible for Making Tax Digital for Income Tax missed the first reporting deadline, according to Azets. Only 436,000 of 864,000 taxpayers submitted their updates on time.

Azets said the learning curve associated with the new requirements, combined with reported HMRC system issues, contributed to the level of non-compliance.

For small businesses and advisers, the figures demonstrate how administrative changes can create additional demands on already stretched finance functions.

Economy & Policy

Government borrowing exceeds expectations

UK Government borrowing unexpectedly reached £1.8bn in July, according to the Office for National Statistics. That was £700m higher than a year earlier and compared with economists’ expectations for no borrowing and an Office for Budget Responsibility forecast for a £500m surplus.

Income tax receipts rose by £1.7bn year-on-year to £17.1bn, but the increase was outweighed by higher expenditure. Social benefit payments increased by £2bn and debt interest costs rose by £700m to £7.7bn.

Borrowing during the first four months of the financial year reached £56.7bn, above OBR expectations, although revised figures leave it £6bn lower than a year earlier. Total UK public debt stands at approximately £2.985trn, equivalent to 94.1% of GDP.

RSM UK chief economist Thomas Pugh has warned that long-term borrowing pressures increase the likelihood of further tax rises.

PM faces difficult choices ahead of October Budget

Economist Gerard Lyons says the Government faces a choice between expanding the state through increased spending, taxation and borrowing, or pursuing tighter fiscal discipline, welfare reform and stronger private-sector-led growth.

With debt, Government spending and borrowing costs already high, the October Budget must balance welfare, investment and defence commitments while rebuilding limited fiscal headroom.

Lyons argues that failure to establish a credible fiscal path could ultimately lead to higher Government borrowing costs, higher interest rates and pressure on sterling.

Experts debate benefits of closer EU single-market ties

Economists and trade experts argue that rejoining the EU single market could materially reduce trade friction and administrative barriers, particularly for the UK services sector.

Research cited in the debate estimates that closer integration could add as much as £92bn to GDP and recover up to 90% of the economic impact attributed to Brexit. The EU accounted for around 41% of UK exports in 2025.

However, RSM chief economist Thomas Pugh cautions that any benefit would depend heavily on the terms of re-entry. Critics also point to structural weaknesses including limited manufacturing capacity, competitiveness and uncertainty surrounding migration policy.

Tax & Government

Government plans review of business rate valuations

The Government is planning a review of business rate valuations for pubs and hotels in England and Wales. Business rates specialist Jerry Schurder will lead the independent review, which is expected to report to the Treasury by March 2027.

Schurder has called for “fundamental reform, not tinkering” and suggested annual revaluations linked more closely to changes in property values.

UKHospitality says business rates remain a significant burden and need to better reflect trading conditions. Critics argue that relief is needed much sooner, with average pub rateable values reportedly having increased by around 30% this year while pandemic-era relief has ended.

Hospitality businesses are simultaneously absorbing higher employer National Insurance, wages, VAT and energy costs. Prime Minister Andy Burnham has promised a 20% business rates cut for pubs, clubs and live music venues from April, although industry representatives argue many operators need support before then.

Employment & Labour

Zero-hours contract proposals face union concerns

Trade unions including Usdaw, GMB and Unite have warned that proposed rules implementing the Government’s ban on exploitative zero-hours contracts could fall short of its intended objectives.

Their concerns centre on a proposed upper-hours threshold and “regularity requirement”, which they say could exclude some workers from gaining a right to guaranteed hours.

The TUC has also rejected claims that the measures could cost employers as much as £2.9bn annually, arguing that much of the estimate assumes employers make no changes to scheduling practices.

The Government says it is consulting businesses and trade unions to ensure the final system works in practice.

FSB warns shift-change rules could reduce flexibility

The Federation of Small Businesses has separately warned that proposals requiring at least seven days’ notice for rota changes could make it more difficult for employers to respond to short-term staffing needs.

The FSB argues that restricting same-day offers of work could unintentionally affect people who depend on flexible employment, including those with caring responsibilities or health limitations.

Estimates suggest the wider reforms could cost businesses as much as £3bn annually in additional bureaucracy and penalties.

Graduate vacancies fall 45%

The graduate jobs market has weakened sharply, with only 8,383 graduate roles advertised in July, down 45% from a year earlier and reportedly the lowest number since 2016.

The decline comes as 262,820 18-year-olds prepare to enter university. Rising unemployment, employer National Insurance and wider labour costs are contributing to reduced entry-level recruitment.

The figures reinforce the wider PMI evidence showing that UK private-sector employment remains under pressure despite improving output.

Retail & Consumer

Retail sales fall 0.5% in July

UK retail sales volumes fell by 0.5% in July, according to the Office for National Statistics, reversing part of June’s 0.7% increase and performing slightly worse than the 0.4% decline economists expected.

Non-store retailers recorded a particularly sharp 3.6% fall. ONS chief economist Grant Fitzner noted that sales nevertheless rose over the latest three-month period, with growth across all main sectors other than motor fuel.

PwC UK retail head Jacqueline Windsor said higher inflation, energy costs and petrol prices were leaving households with less money for discretionary spending outside groceries and fuel.

Restaurant profits fall 44%

Profits across Britain’s 100 largest restaurant groups have fallen 44% to £204m, according to UHY Hacker Young.

Revenue actually increased to £13.3bn from £12.9bn, showing that stronger sales have not translated into stronger profitability. Higher employer National Insurance and minimum wage costs are among the main pressures.

Separate research from hospitality trade bodies found that 22% of businesses are operating at a loss, compared with 15% three months earlier.

Heatwaves make air conditioning more important to office tenants

Repeated summer heatwaves are making effective air conditioning an increasingly important requirement for London office occupiers.

The trend is exposing a growing divide between newer City buildings and older West End properties where cooling systems can be more difficult and expensive to upgrade.

For landlords and occupiers, changing expectations could increase refurbishment and energy expenditure and influence future leasing decisions.

Industry & Investment

Small housebuilders struggle as sales slow

Smaller British housebuilders are struggling to sell new homes as higher mortgage rates, increased development costs and weaker consumer confidence weigh on demand.

Data from Savills and the Land, Planning and Development Federation indicates developers building fewer than 50 homes annually are selling only around 0.15 to 0.25 homes per week.

The organisations have urged the Government to restore demand and improve development viability, warning that smaller builders could otherwise be squeezed out of the market despite being needed to help meet the target of building 1.5 million homes.

Volkswagen warns further major cost cuts are necessary

Volkswagen chief executive Oliver Blume says the group needs significant additional cost reductions to remain competitive, arguing that its overheads are more than 30% higher than those of competitors.

Around 50,000 additional job cuts have reportedly been suggested, on top of approximately 50,000 reductions already taking place. Volkswagen employs about 663,000 people worldwide.

The scale of the proposed restructuring highlights the pressures facing established European manufacturers from costs, global competition and technological change.

Shein begins Hong Kong IPO book-building

Fast-fashion retailer Shein has begun book-building for its delayed Hong Kong flotation and is seeking to raise approximately HK$13.9bn, or $1.8bn.

The transaction could value the business at around $27bn, dramatically below the $98bn valuation achieved in 2022.

Weak global economic growth, rising operating costs, US tariff pressures and increased competition have all contributed to the reduced valuation. Trading is expected to begin on 1 September.

Future World Cup bid could support hospitality and infrastructure

Prime Minister Andy Burnham is reportedly exploring a potential bid to bring the men’s football World Cup back to the UK, with 2038 the earliest available tournament.

Discussions have reportedly included British football authorities and potential stadium regeneration. The Government is also pursuing other major sporting events, including a northern England Olympic bid for the 2040s.

England, Scotland, Wales and the Republic of Ireland are already preparing to co-host Euro 2028.

A future World Cup would have implications for tourism, hospitality, construction, transport and regional investment, although any bid remains at a very early stage.

Energy & Costs

Government considers major gas infrastructure investment

The Government is considering spending billions of pounds on new infrastructure intended to strengthen Britain’s ability to withstand future gas supply shocks.

Options reportedly include a government-backed LNG storage and regasification vessel or creation of a strategic gas reserve. Ministers expect gas to remain important to Britain’s energy system for decades as North Sea production declines and import dependence increases.

North Sea producers have criticised the approach, arguing domestic gas has a substantially lower carbon footprint than imported LNG and would reduce dependence on overseas supplies.

Energy companies on alert following cyber attack

UK energy companies have been placed on heightened alert after a cyber attack forced a small gas-fired power plant offline for four days last month.

The incident did not affect Britain’s wider electricity supply. Iranian hackers have reportedly been identified as the likely perpetrators.

The attack nevertheless demonstrates the growing operational risks surrounding critical infrastructure at a time of heightened geopolitical tensions.

AI productivity could keep interest rates higher

Bank of England insiders have warned that rapid adoption of artificial intelligence could ultimately keep interest rates higher than businesses might otherwise expect.

Jenny Chan, an adviser to the Monetary Policy Committee, argues that expectations of higher future productivity can encourage businesses and consumers to spend and invest more today. If demand rises faster than supply, inflation could increase and require tighter monetary policy.

The argument draws parallels with the technology boom of the 1990s, when strong productivity gains also contributed to higher demand.

International & Trade

Canada retaliates after US imposes 50% tariffs

Trade tensions between the United States and Canada escalated sharply over the weekend after negotiations collapsed.

US tariffs of 50% on around $20bn of Canadian goods took effect on Saturday, covering products including plywood, electrical equipment and other imports. Canadian Prime Minister Mark Carney has announced retaliatory measures on US products.

The dispute adds another layer of uncertainty to global supply chains and could increase input costs if tariffs spread through manufacturing and distribution networks.

UK Weather Today

Sunny spells and largely dry conditions are expected across England. London is forecast to reach around 22°C, with a low of approximately 15°C. Belfast should see bright sunshine, while Edinburgh can expect sunny spells.

Global Market Summary

Markets entered Monday with a mixed tone. European shares were relatively resilient after gains on Friday, while Asian technology markets suffered significant losses following Alibaba’s record fundraising. Investors are also balancing stronger economic data against US-Canada trade tensions, uncertainty surrounding Iran and the Strait of Hormuz, elevated bond yields and several major central-bank and technology events later this week.

UK and European markets

The FTSE 100 rose 0.6% on Friday to 10,816.56 and was up a further 0.15% at around 10,833 on Monday morning.

The STOXX Europe 600 gained 0.6% on Friday to 654.18 and was around 654.86, up 0.10%, on Monday morning.

The EURO STOXX 50 was almost unchanged on Monday at approximately 6,462, down 0.01%.

Germany’s DAX gained 0.6% on Friday to 26,136.56 and was around 26,145, up 0.03%, on Monday morning.

France’s CAC 40 finished Friday 0.4% higher at 8,484.43 and was around 8,486, up 0.02%, early Monday.

Stronger European PMI data provided support, with the eurozone composite PMI reaching 52.1. Europe has also been relatively insulated from Monday’s Asian technology sell-off because its major indices have a lower technology weighting.

US markets

Wall Street recovered on Friday following a difficult week.

The S&P 500 gained 0.4% to 7,674.

The Dow Jones Industrial Average rose 1.0% to 53,277.

The Nasdaq 100 added 0.3% to 29,309, although the broader Nasdaq had fallen 2.1% over the week as elevated long-term Treasury yields pressured technology valuations.

Monday futures were mixed, with S&P 500 futures around 0.1% higher while Nasdaq 100 futures were approximately 0.3% lower as investors reduced technology exposure ahead of Nvidia’s results on Wednesday.

Asian markets

Asian equities had a much weaker Monday.

The Nikkei 225 fell 0.7% to 65,528.

The Hang Seng dropped 1.9% to 25,517, while the Hang Seng Tech Index fell 3.6%.

Alibaba was the largest individual drag, falling 8.5% after raising $10.2bn through Hong Kong’s largest-ever follow-on share offering.

South Korea’s KOSPI fell 3.1%, while the Shanghai Composite declined 0.6%.

Market drivers

Several issues are likely to determine sentiment this week.

US-Canada trade talks collapsed over the weekend, resulting in new 50% US tariffs and Canadian retaliation. Tensions with Iran also remain a significant risk, particularly following renewed threats involving the Strait of Hormuz.

Investors are meanwhile focused on Nvidia’s earnings on Wednesday, US core PCE inflation data on Friday and Federal Reserve Chair Kevin Warsh’s Jackson Hole speech later the same day.

Long-term bond yields remain another concern. The US 30-year Treasury yield reached 5.34% last week, its highest level since 2007, while the 10-year yield was around 4.71% on Monday morning.

Currencies

Sterling was little changed compared with Friday.

GBP/USD: approximately $1.3628, down around 0.12% from Friday’s 1.3644.

GBP/EUR: approximately €1.1680, broadly unchanged, with EUR/GBP around 0.8560.

Currency movements remain relatively modest despite wider volatility in bond and equity markets. The Canadian dollar weakened following the collapse of trade negotiations with the US.

Commodities

Oil prices fell sharply when markets reopened despite continuing geopolitical risks.

Brent crude: approximately $92.69 a barrel, down 1.80% from Friday.

WTI crude: approximately $84.90 a barrel, down 2.48%.

Gold: approximately $4,641 an ounce, up 0.82% from Friday’s close.

The decline in oil appears to reflect demand concerns and profit-taking after recent geopolitical gains. However, Iran’s threats concerning the Strait of Hormuz mean the possibility of renewed energy-price volatility remains considerable. Gold continues to benefit from uncertainty around global politics, currencies and government debt.

For UK businesses, the most important market message is that energy and borrowing costs remain capable of moving quickly. Even where current oil prices are falling, geopolitical disruption could reverse that position rapidly, while elevated bond yields continue to feed through into financing costs.

Insolvency Watch

Administrations (5)

• 18 STATION RD LTD
• CIRCUS 25 LTD
• DEVOY & SMALLBONE PROPERTIES LTD
• PRIESTLEY INVESTMENTS (LEEDS) LIMITED
• WHITEGOLD PROPERTIES LTD

Liquidations (16)

• AG ESPORTS CONSULTING LIMITED
• ALDRIDGE PRIME LIMITED
• BLENHEIM LIMITED
• COBALT POWER LIMITED
• EDDERS LIMITED
• EMSEE CORPORATE FINANCE LTD
• EUREKA HOMES LIMITED
• EXXONMOBIL INVESTMENT COMPANY LIMITED
• FMPP GROUP LIMITED
• GEORGE’S FOLKS LIMITED
• HARLEY PROPERTIES LIMITED
• PARITY COMPUTER CONSULTANCY LIMITED
• PIGEON DEVELOPMENTS LIMITED
• PXJ MANAGEMENT CONSULTING LIMITED
• SOLAR SLATE LIMITED
• UK DIGITAL RADIO LIMITED

Protecting cashflow when growth does not mean stronger finances

Today’s news demonstrates why headline economic growth should never be treated as proof that customer risk is falling.

The UK private sector is expanding, yet employment continues to contract. Restaurant revenues are rising while profits collapse. Retail demand weakened in July, smaller housebuilders are struggling to sell and more than 53,000 companies are already classed as being in critical financial distress.

For businesses supplying goods or services on credit, this is exactly the environment in which disciplined credit management matters.

CPA can help businesses identify and respond to changing customer risk through CreditCare credit reports, ongoing debtor monitoring, structured credit control support and professional recovery of overdue accounts.

Early action matters. An invoice that is slightly late today can become significantly harder to recover if a customer’s financial position deteriorates.

CPA’s approach is designed not simply to recover money, but to improve payment performance while preserving valuable customer 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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