Key Points from the Week:
UK manufacturing investment plunged to its lowest point since 2017, sharply reducing spending on plant, machinery, and R&D, a signal of concern for productivity and future growth. The Office for Budget Responsibility’s looming productivity revision could cost public finances over £20 billion, thrusting Chancellor Rachel Reeves into hard decisions ahead of November’s Budget. Although efforts to boost trade with the Gulf and a surprising 0.5% increase in retail sales point to pockets of resilience, weak order books, slow consumer spending, and fiscal uncertainty continue to cast a shadow over the economy.
Welcome to HSA Advisory’s Financial Services Newsletter, your concise roundup of the UK macroeconomic developments and financial services transactions.
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UK Macroeconomics
27 October 2025: UK manufacturers investing at lowest rate since 2017 (6.8% of turnover) and R&D spending also falling
– According to Make UK, British manufacturers are devoting just 6.8% of their annual turnover to plant and machinery in 2025, down from 8.1% in 2024, marking the weakest investment intensity since 2017
– Research and development (R&D) investment has also tapered off: manufacturers reported spending 6.2% of turnover on R&D in 2025, down from 6.5% a year earlier – signalling that innovation efforts are being scaled back
– The slowdown in investment comes despite the government’s new industrial strategy launched in June 2025. Make UK notes that nearly 40% of surveyed firms cite tax incentives as a critical factor influencing investment choices and calls for those incentives to be simplified and reinforced ahead of the upcoming budget
– The implications are significant: falling investment and innovation threaten productivity growth and global competitiveness. With UK business investment already lagging peer economies, the report warns the manufacturing sector may struggle to support future growth without a reversal in capital and R&D spending patterns
27 October 2025: UK Chancellor Rachel Reeves faces £20 billion hit to the UK public finances from productivity downgrade
– The Office for Budget Responsibility (OBR) is set to reduce its trend productivity-growth forecast by around 0.3 percentage points, with analysts estimating this downgrade alone could cost the public finances more than £20 billion
– Chancellor Rachel Reeves is confronting this strain just as her already narrow “head-room” against fiscal targets (about £9.9 billion) is being consumed. The scale of the downgrade threatens to force tougher decisions in her November Budget
– The productivity drop translates into weaker tax receipts and higher borrowing needs because slower output reduces long-run revenue growth. With borrowing costs elevated and public spending under pressure, the fiscal picture becomes even more challenging
– Policies to bridge the gap this autumn may include extending tax-threshold freezes, increases in income tax, or large cuts in public-sector spending, each with risks for growth and political credibility. With productivity growth foundational to long-term prosperity, the downgrade signals structural weakness the government must confront
26 October 2025: UK Chancellor to hold Gulf trade talks in push for pro-growth policies
– Rachel Reeves, the UK Chancellor, is travelling to Riyadh for high-level talks with the Gulf Cooperation Council (GCC) countries as part of a strategy to bolster the UK’s growth outlook ahead of the upcoming Budget. She aims to secure a trade and investment deal that will help cut the fiscal gap and strengthen investor confidence
– Officials hope a trade deal with the GCC could generate around £1.6 billion annually for the UK economy, while simultaneously underpinning the Chancellor’s arguments to the Office for Budget Responsibility (OBR) that such deals should count towards future growth forecasts and fiscal head-room
– Reeves is taking a broad economic agenda to the Gulf: alongside trade talks, she’s promoting the UK as a destination for sovereign wealth fund investment, particularly in sectors such as tech, fintech, life sciences and infrastructure – signalling a pro-growth posture rather than simple austerity
– Despite the optimism, the deal remains complex and is not yet finalised. Observers caution that expecting large-scale growth benefits too soon may be overly optimistic given lingering structural issues in the UK economy. There is also reputational risk, given human-rights concerns flagged by campaigners in some Gulf states
25 October 2025: Think-tank Fabian Society says extending freeze on income-tax thresholds could raise ~£12 bn
– The Fabian Society has urged Chancellor Rachel Reeves to extend the freeze on income-tax thresholds for a further two years, estimating this could raise approximately £12 billion in the upcoming Budget. This recommendation comes as the government faces a fiscal gap of roughly £10-£30 billion due to weaker growth and higher borrowing
– The proposal builds on the existing “threshold freeze” – which holds the income levels for tax bands constant rather than adjusting for inflation, thus increasing tax liabilities over time via fiscal drag. The Fabian modelling indicates nearly half of the additional revenue would come from the top 20% of households, making it more progressive in their view
– The timing and scale matter: with the Office for Budget Responsibility (OBR) having downgraded productivity forecasts and growth, the extra revenue could significantly reduce the need for spending cuts or broader tax hikes. But the Society acknowledges it is not without political risk
– Crucially, this option allows the government to raise meaningful funds without increasing the headline income-tax rates, thereby retaining policy alignment with earlier manifesto commitments. Still, critics warn that relying on fiscal drag could undermine trust, especially if wage growth fails to keep up with inflation
25 October 2025: UK manufacturers expect orders to fall further, CBI survey finds
– In the latest Confederation of British Industry (CBI) Industrial Trends Survey, UK manufacturers reported a balance of -38 on total order books for October, down sharply from 27 in September. The decline is the steepest since the early months of the pandemic, reflecting both domestic and export demand weakness
– Export orders were especially weak, with the balance falling to -46, the lowest level in the time series and signalling that global demand and competitiveness remain persistent headwinds for UK-manufacturing firms
– Looking ahead, manufacturers are forecasting further declines: the balance of expectations for new orders over the next three months rested at -23, indicating that firms are bracing for extended softness rather than a quick rebound in demand
– The survey also highlighted subdued investment intentions and deteriorating business sentiment. With demand slackening, many firms are delaying or scaling back capital expenditure and capacity-expansion plans, citing uncertainty ahead of the upcoming Budget and sluggish net returns
25 October 2025: Bumper buy-backs stunt UK dividend growth
– According to the latest data from Computershare, UK-listed companies paid out £24.6 billion in dividends in Q3, down 1.4% year-on-year equating to roughly £1 billion less than in the same quarter of 2024
– One major drag on dividend growth has been the increase in share-buyback programmes: roughly 160 companies are currently executing significant buy-backs, with some diverting cash that might previously have been paid as dividends. For example, Shell is reported to have spent almost twice as much on buy-backs over the past year than on dividends
– The fall in one-off or “special” dividends also weighed heavily: the decline in such payments knocked around 5.7 percentage points off Q3 growth. Mining companies (such as Rio Tinto and Glencore) were large contributors to the drop, cutting their payouts as commodity prices came under pressure
– Despite the headline decline, the underlying picture is nuanced: about 80% of UK companies either raised or held their dividends this quarter, and the median per-share dividend growth was still around 3%. Nevertheless, the shift towards buy-backs and weaker special dividends signals uncertainty for income-seeking investors
25 October 2025: Row erupts as lenders push to delay car-loan compensation
– A serious showdown has broken out between the Financial Conduct Authority (FCA) and several UK motor-finance lenders over the regulator’s proposed £11 billion compensation scheme for customers who took out unfair car-loans between 2007 and 2024. The FCA has refused lenders’ calls to extend the six-week consultation period, arguing that prompt redress is essential
– Lenders contend the timeframe is too short to properly assess the impact of the scheme, which could cover an estimated 14.2 million agreements and involve average payouts around £700 per deal. They warn the cost and complexity could be materially larger than currently estimated
– The FCA, however, insists legal clarity is now established following recent Supreme Court rulings, and says delaying the scheme would prolong consumer injustice and undermine market confidence. The regulator emphasises that the aim is to deliver compensation efficiently while preserving the integrity of the motor-finance market
– The dispute raises broader questions about the scale of the final redress burden on lenders, the potential knock-on effects for consumer credit markets (such as higher costs or restricted availability), and how this will influence investor sentiment in UK financial services. Firms are reportedly preparing for the worst-case financial impact while negotiating the final terms
24 October 2025: UK retail sales unexpectedly rise by 0.5% in September
– UK retail sales volumes increased 0.5% month-on-month in September, beating expectations of a small decline and marking a modest recovery after a weak summer for consumer spending. Analysts noted that online sales, technology products and gold jewellery were the strongest contributors, suggesting demand is being supported by promotional activity and shoppers moving quickly ahead of potential price rises
– Consumer confidence remains fragile, but declines in certain essential categories appear to be easing. Some retailers reported better footfall in electronics and household goods, hinting that shoppers may be replacing items delayed earlier in the year due to cost-of-living pressures. This points to a tentative improvement in discretionary appetite, even if still well below pre-pandemic momentum
– Economists caution that the uplift is narrow and masks ongoing strain in core demand. Food retailers and mid-market fashion outlets continue to see weaker volumes as households stay selective, while elevated mortgage and rental costs keep budgets tight
– Nevertheless, the upside surprise offers the government a small dose of positive news before a tax-heavy Budget. If consumer spending holds near these levels, it could help underpin the UK’s modest growth outlook – though retailers warn that sustained demand will depend heavily on wage resilience and fiscal clarity next month
24 October 2025: UK flash composite PMI rises to 51.1 in October, manufacturing nearly back to growth
– The S&P Global “flash” composite Purchasing Managers’ Index (PMI) for the UK climbed to 51.1 in October from 50.1 in September, just above the threshold of 50 that indicates expansion
– Encouragingly, the manufacturing PMI rose to 49.6, marking the highest level in 12 months and signalling it is very close to returning to growth. Although still below 50, this represents a notable improvement from sharper contractions in recent months
– Business conditions improved somewhat: new orders and business-confidence metrics reached their second-highest levels of the year, and job losses eased to their lowest since May. However, firms remain cautious, especially ahead of the upcoming budget and in an environment of elevated costs and weak export demand
– Despite the uptick, the pace remains modest: S&P Global estimates the PMI reading is consistent with only about 0.1% quarterly GDP growth. The recovery is fragile, with momentum potentially vulnerable to shocks from trade, policy or global demand
24 October 2025: UK economy shows signs of resilience ahead of tax-hike Budget, yet growth remains very modest (~0.1% quarter)
– Economic indicators point to a slight recovery in the UK as the government readies a tax-raising Budget. While GDP growth is hovering around 0.1% for the quarter, this modest uptick reflects stabilising demand in services and easing cost pressures, rather than a full-blown rebound in activity
– Surveys of business sentiment suggest companies are less pessimistic than earlier in the year: new orders are creeping higher, the rate of job losses has slowed and supply-chain problems are improving. However, investment remains muted and export performance continues to disappoint, limiting upside momentum
– Against this backdrop, fiscal policy uncertainty looms large. With Chancellor Rachel Reeves widely expected to raise taxes, firms are cautious about committing to hiring or capital expenditure until the Budget path becomes clearer. Coupled with a potential productivity downgrade from the Office for Budget Responsibility, this is weighing on confidence
– The UK economy thus finds itself in a precarious position: resilient enough to avoid contraction, yet fragile and lacking strong growth drivers. Unless productivity improves and investment rebounds, the current marginal expansion could falter rather than gather strength
24 October 2025: Input-price inflation eases as manufacturing output returns to growth in UK private sector
– A survey from S&P Global shows that input-price inflation in the UK private sector fell to its lowest level since November 2024. Companies cited softer raw-material costs and improved supply-chain conditions, which helped ease pressure on margins and selling-price increases
– The same data reveal that manufacturing output expanded for the first time in a year. The manufacturing output index jumped to 51.2 from 45.7 in September, indicating a return to growth in factory production after twelve consecutive months of contraction
– New business volumes also saw improvement in October, which contributed to the weakest rate of job losses in the private sector since May. Firms remained cautious on hiring and investment, but increased orders suggested tentative signs of recovery in activity
– Despite these positive signs, the overall pace of growth remains modest. The composite PMI stood at 51.1, signalling expansion but consistent with only about 0.1% quarterly GDP growth. Firms continue to face weak export demand and lingering domestic uncertainty
23 October 2025: UK Chancellor poised to hike National Insurance on LLP partners in Budget
– Reports suggest Rachel Reeves is planning to end the exemption from employer National Insurance contributions (NICs) for partners in limited liability partnerships (LLPs), a category including many lawyers, accountants and private-practice doctors. Under the change, around 200,000 individuals could be affected and the reform may raise ~£1.9 billion annually
– Currently, LLP partners are treated as self-employed, meaning neither employer nor employee NICs are applied. By introducing the employer NIC element, estimated at roughly 15% of earnings — the effective tax rate for affected partners could increase significantly, for example from 47% to 54%
– The change is being pitched as a fairness measure: the government argues that similar earnings should face equivalent tax regardless of business structure. But professional bodies warn the move risks damaging UK competitiveness in legal, accountancy and medical sectors and may prompt restructuring or relocation of high-earning partners abroad
– While the move would help bridge a looming fiscal gap estimated at £20-30 billion, it carries growth risks. If partners reduce investment or relocate, the broader economic impact could undermine the government’s pro-growth narrative at a delicate time ahead of the Budget
23 October 2025: Retail and hospitality wage growth hit as UK employers offset tax rise
– In the retail sector, full-time weekly earnings increased only 3.8% in April 2025 compared with the same month the previous year, while in accommodation and food services the rise was 3.9% – significantly below the 5.3% median increase across all sectors
– Employers in these sectors have faced higher labour costs, stemming from increased employer national insurance contributions (NICs) and a 6.7% rise in the minimum wage, and appear to have responded by limiting wage growth, reducing staff hours and cutting headcount
– Weekly hours worked fell by 2% in retail and accommodation, and by 3.8% in food services, a sign that businesses are managing cost pressures by trimming hours rather than lifting wages for all staff
– While earnings did rise in cash terms, the slower pace in retail and hospitality highlights how tax and cost pressures are being absorbed by workers and businesses in the sectors most exposed to entry-level roles and flexible hours. Structural factors such as part-time prevalence and cost spikes contribute to the weakness
23 October 2025: CBI says retail sales outlook weak, business confidence low ahead of Budget
– The Confederation of British Industry (CBI) reported that its gauge of how UK retail sales compared year-on-year stood at -27 in October, only a slight improvement from -29 in September, marking the 13th consecutive month of falling sales volumes
– Looking ahead, retailers’ expectations for the next month slipped further: the CBI’s forward-looking indicator dropped to -39 from -36, signalling that firms anticipate sales will continue to decline as consumer confidence remains weak and businesses brace for fiscal changes
– The survey highlighted that much of the softness is tied to heightened uncertainty ahead of the upcoming UK Budget. The CBI noted that distributors and retailers are holding back on stock, investment and hiring amid unclear policy signals and anxiety over potential tax or regulatory shifts
– Beyond retail, business confidence broadly remains low: the CBI’s wider industrial trends survey found new order volumes at about -38, the weakest reading since late 2024, reflecting weak demand and business caution across sectors, an added concern for the Chancellor’s growth plans
22 October 2025: FTSE rises as steady inflation keeps hopes for a Bank of England rate cut alive
– The FTSE 100 climbed notably after UK inflation held at 3.8% in September, rather than rising towards 4% as many had expected. This unexpected steadiness has increased market confidence that the Bank of England might cut interest rates later this year
– Investors responded by shifting their expectations: the probability of a rate cut in December surged towards 75%, and gilt yields fell, while the pound weakened slightly. The strong performance of large UK-listed stocks with overseas earnings boosted the index further
– Despite the upbeat market mood, economists caution that inflation remains nearly double the Bank’s 2% target and growth in the UK economy is still modest. While the inflation plateau raises hope for easing policy, underlying price pressures especially in services are still high
– The positive sentiment across equities could provide a tail-wind for the upcoming Budget and for UK companies more broadly. However, if the Bank signals a delay or conditions deteriorate, the rally may reverse quickly. For now, the correlation between inflation stability and equity gains is clear
22 October 2025: UK’s ‘real living wage’ to rise almost 7%
– The voluntary “real living wage” in the UK is set to increase by 6.7% from £12.60 to £13.45 per hour across the country, and by 6.9% in London to £14.80 per hour, as calculated by the Living Wage Foundation
– This pay boost will directly benefit nearly half a million workers employed with over 16,000 accredited “Living Wage Employers”, including major brands like Uniqlo, University of Salford and Truro City Council
– The rise comes against the backdrop of rising living costs, with the Foundation noting that 42% of low-paid workers have used food banks in the past 12 months – indicating persistent in-work poverty despite employment
– While the real living wage is voluntary (unlike the statutory National Living Wage), the increase may influence broader wage pressures and employer expectations, particularly as businesses navigate higher wage costs, inflation and upcoming fiscal policy changes
22 October 2025: Inflation stands still at 3.8% as Budget tax plans come into focus
– According to the Office for National Statistics (ONS), annual consumer-price inflation in the UK held steady at 3.8% in September, unchanged from August and July, confounding analysts who expected a rise to 4.0%
– While this stability may ease some pressure on the Bank of England (BoE) by indicating inflation may have peaked – the rate remains nearly double the 2% target, meaning price pressures continue to weigh on households’ real incomes and public finances
– The timing is critical: with the upcoming Budget in November, Chancellor Rachel Reeves faces the challenge of balancing tax rises (to build “head-room”) against the risk of adding to inflation or depressing growth. The unchanged inflation reading increases the margin for manoeuvre but offers little comfort on the underlying cost-of-living squeeze
– Markets responded swiftly: expectations for a rate cut by the BoE later this year rose sharply, and gilt yields fell. However, economists warn that the stability of inflation should not be mistaken for weakness services inflation remains elevated and energy/transport costs could reactivate pressure
22 October 2025: Rachel Reeves launches “blitz” on red-tape in a bid to save £6 billion a year for UK business
– The Chancellor announced a sweeping regulatory reform package at the inaugural Regional Investment Summit in Birmingham, aimed at cutting the cost of “pointless admin” for businesses. The Treasury projects savings of nearly £6 billion a year by the end of the Parliament through streamlined reporting, fewer forms and faster planning approvals
– Key measures include scrapping the requirement for directors’ reports for more than 100,000 small firms, digitising planning approvals and creating an “AI growth lab” to exempt certain firms from legacy regulations. The government estimates firms will save on average 200 administrative hours annually
– The reform push is part of a broader growth strategy designed to bolster the UK’s productivity performance and reassure investors ahead of the upcoming Budget. Business groups welcomed the announcements but urged clarity and timely implementation of the proposals
– While the move signals a pro-enterprise shift, critics caution that regulatory reform alone is unlikely to offset structural challenges such as weak productivity or low investment unless supported by credible growth-orientated policy beyond declaratory promises
21 October 2025: Tight fiscal policy seen as necessary – but a double-edged risk for UK economy
– The UK government faces intense pressure to tighten fiscal policy as borrowing remains historically high and tax receipts have come in weaker than forecast. Economists say this fiscal squeeze could force overdue reforms to improve productivity, refocus spending on growth-enhancing priorities and broaden the tax base more efficiently
– However, the timing is delicate. With GDP growth running at barely 0.1% per quarter and consumer demand still weak, tighter policy could choke off the fragile economic resilience seen in recent data. Businesses are already delaying investment decisions ahead of the Budget, signalling anxiety about the scale of upcoming tax changes
– Analysts warn that if fiscal consolidation leans too heavily on tax hikes, it could depress disposable incomes and curb investment – impairing the very productivity gains needed to fix the public finances. Investors also remain alert to any sign that fiscal tightening lacks credibility or fails to address structural weaknesses
– The challenge for Chancellor Rachel Reeves is navigating a narrow path: restoring fiscal headroom while avoiding a renewed downturn. The right mix could strengthen confidence and long-term growth prospects, the wrong mix risks undermining the recovery before it takes hold
21 October 2025: UK Borrowing Hits Nearly £100bn for April–September, Second-Highest Since 1993
– The country borrowed approximately £99.8 billion between April and September 2025, outstripping the Office for Budget Responsibility (OBR)’s March forecast by £7.2 billion and registering the second-highest half-year total on record since 1993
– The overshoot occurred despite stronger-than-expected economic growth and elevated inflation, factors that ordinarily boost tax revenue, highlighting that accumulating debt pressure is not simply cyclical
– A large part of the extra borrowing stemmed from higher spending by local authorities and public corporations, rather than central government, and was not fully matched by revenue gains
– The ballooning deficit complicates the fiscal landscape for Chancellor Rachel Reeves ahead of the November Budget, increasing the likelihood of either tax rises, spending cuts or both to bridge a growing fiscal gap
UK Financial Services Key Transactions
27 October 2025: Experian Acquires KYC360 to Enhance Fraud & Financial-Crime Capabilities
– Global data firm Experian plc announced the acquisition of UK/Ireland-based KYC360, integrating its customer- and business-lifecycle compliance tools into Experian’s Ascend platform to help clients onboard faster, reduce operational costs and strengthen anti-financial-crime defences across the entire customer journey
27 October 2025: Pets at Home Executes Share Buy-Back via Cancellation of 70,000 Shares
– Pets at Home Group Plc purchased and cancelled 70,000 ordinary shares under its ongoing buy-back programme, reducing the total number of voting rights to 453,645,265. The move forms part of a broader £25 million capital-return initiative announced earlier in the year
27 October 2025: Trian and General Catalyst launch $7.2bn bid for Janus Henderson
– Nelson Peltz’s Trian Fund Management and General Catalyst have proposed a ~$7.2bn cash takeover of asset-manager Janus Henderson at $46 per share, aiming to drive turnaround and growth. A special board committee will review the unsolicited offer, though there is no certainty the deal will proceed
24 October 2025: Prospero.ai and Finimize unite to empower retail investors
– AI-platform Prospero.ai and financial news community Finimize have partnered to bring institutional-grade investment insights and education to retail investors, combining AI-driven analytics with Finimize’s large user base to boost accessibility, personalisation and financial literacy in the mass-market investment space
23 October 2025: GTCR and Synova Complete Investment in JMG Group
– US private-equity firm GTCR, alongside existing backer Synova, has completed its investment in UK-based insurance broker JMG Group, headquartered in Leeds. The deal supports the growth ambitions of JMG’s leadership team, led by CEO Nick Houghton, and strengthens its M&A-driven expansion across the UK market
23 October 2025: Gibraltar-based Turicum Private Bank acquires a majority stake in London wealth manager Hassium Asset Management
– Turicum Private Bank, founded in Gibraltar and backed by Swiss private-bankers, has taken a significant share in Hassium Asset Management to mark its entrance into the UK market. The deal combines Turicum’s regulatory and banking expertise with Hassium’s wealth-management platform, enabling expanded services while keeping existing client mandates and relationship managers intact
21 October 2025: Instanda Raises $20m from CommerzVentures
– London-based no-code insurtech Instanda secured $20 million in funding led by CommerzVentures to accelerate global expansion, enhance its platform enabling insurers to build, configure and distribute products without coding, and leverage its recent 40 % + compound annual growth rate toward profitability and scale
21 October 2025: Brown & Brown acquires Kent-based MGA Pardus Underwriting
– Global broker Brown & Brown (Europe) has agreed to acquire Pardus Underwriting, a Cranbrook, Kent-headquartered managing general agent specialising in property-owners and commercial combined insurance. The acquisition, already approved by regulators, retains Pardus’s existing leadership and locations as it integrates into Brown & Brown’s underwriting division
21 October 2025: JMG Group Acquires Three Family-Run Brokers
– UK insurer broker JMG Group completed the acquisition of Allsop Commercial Services, Highhouse Insurance Services and Insursec Risk Management, adding specialist commercial and high-net-worth expertise to its national network while preserving each firm’s local management and client-centric service model
A Word from Our Founder & Managing Director
This week makes one thing clear: conviction is key. In a landscape defined by policy uncertainty and cautious capital, those who invest with purpose, innovate boldly, and anticipate regulatory change rather than merely react will shape the future. As the Budget draws near, it’s time for businesses and investors to sharpen their focus and raise their game; real opportunity lives in complexity for those with the clarity to navigate it. At HSA Advisory, volatility is not just a challenge, it’s a catalyst for focused strategy. As fiscal tightening shifts market dynamics, strategic positioning and vision are paramount. Our commitment is to guide clients through disruption, zero in on value, manage risk, and seize long-term growth in today’s evolving environment.
Himanshu Singh, Founder & Managing Director
Pulse Check
With inflation cooling only slowly, business investment still muted, and households cautious before the November Budget, confidence across the UK economy remains fragile. As spending cuts and selective tax rises are debated, the key question is: can the Chancellor restore fiscal credibility without undermining growth?
We’d love to hear your thoughts.
Source: Financial Times, Reuters, The Times, Insurance Times, Insurance Business UK, The Guardian, Insurance Age, CityWire, FinTech Global.
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