Key Points from the Week:
The UK economy is grappling with increasing fiscal and investment challenges as business sentiment remains fragile leading up to the November Budget. Productivity outlooks have been revised downward, and speculation about tax increases is adding to the cautious mood, with the Bank of England keeping rates steady at 4% while hinting at a potential cut next month.
Construction activity fell to a five-year low, and trade figures revealed ongoing weakness in exports. Corporate trends reflected similar restraint, with dividend growth slowing against a backdrop of record share buybacks and turbulence from car-finance disputes unsettling lenders.
Nonetheless, robust performance in services and continued strength in financial sector deal activity serve as reminders that selective optimism continues to support the UK’s recovery narrative.
Welcome to HSA Advisory’s Financial Services Newsletter, your concise roundup of UK macroeconomic developments and financial services transactions.
Sign up to get the newsletter delivered every Tuesday. For insights, M&A support, or advisory discussions, reach out to Himanshu Singh, Founder & Managing Director, at himanshu.singh@hsa-advisory.co.uk
UK Macroeconomics
10 November 2025: Bumper buybacks stunt UK dividend growth
– UK firms are increasingly favouring share buybacks over dividend payouts, slowing headline dividend growth despite robust profits. According to recent data, total dividend growth has plateaued as buyback spending hits record levels
– Companies argue buybacks offer flexibility and capital-efficiency advantages, especially amid tax uncertainty
– However, pension funds and income-focused investors have voiced concern that lower dividends reduce predictable cash flows, weakening the UK’s traditional appeal for income investment
– Analysts say this trend could complicate efforts to revive the London market’s competitiveness unless balanced with stronger reinvestment and productivity gains
10 November 2025: AI will lead one in four big UK businesses to cut staffing
– A new survey shows that one in four large UK companies plan to reduce headcount within the next 12 months as artificial intelligence adoption accelerates, signalling major structural changes in the workforce
– Businesses cite automation, cost optimisation, and improved process efficiency as key drivers behind job reductions, especially in administrative, data-processing, and customer-service functions
– The trend reflects firms’ growing urgency to offset rising wage bills and stagnant productivity. Many employers view AI as a way to maintain competitiveness in a challenging macroeconomic environment marked by tight margins and fiscal pressures
– Economists warn that while AI-driven efficiency may lift profitability and output in the medium term, the near-term impact on employment and consumer confidence could weigh on spending and slow the UK’s fragile growth recovery
10 November 2025: Budget speculation dampening UK growth, warns City commentary
– A Bloomberg-poll-driven commentary highlighted how speculation about tax rises in the upcoming Budget has held back investment and spending, acting as a drag on growth
– The UK economy is expected to have grown just 0.2% in Q3, with some forecasters expecting no growth in September, much of the softening attributed to uncertainty over tax policy
– Employers surveyed have cited policy uncertainty as a key reason for delaying hiring, pausing capital expenditure and reducing production plans
– The message: while headline data may look stable, underlying momentum is fragile and the risk of policy-driven slowdown is rising
9 November 2025: UK Chancellor Rachel Reeves signals she will break manifesto pledge with Budget tax rises
– Chancellor Rachel Reeves has hinted that she may abandon parts of Labour’s manifesto tax pledges in the upcoming Budget, citing the need to stabilise public finances after recent fiscal downgrades and weaker-than-expected productivity data
– The move could see higher taxes on wealth and income brackets previously promised protection, as Reeves faces a £20–30 billion fiscal gap ahead of the Office for Budget Responsibility’s updated forecasts
– Treasury officials argue that targeted tax increases are necessary to fund public services and reassure markets about fiscal sustainability, while maintaining a focus on “fairness” and investment-led growth
– Economists warn the decision risks undermining voter confidence and business sentiment, but say avoiding deeper spending cuts could preserve growth momentum in the short term, especially if paired with pro-investment measures
8 November 2025: UK chancellor to hold Gulf trade talks in push for pro-growth policies
– Chancellor Rachel Reeves is visiting Gulf states this week to deepen trade and investment links, part of a broader strategy to attract foreign capital and strengthen the UK’s external growth engines. The talks aim to secure commitments in energy, technology, and green finance
– Officials say the visit builds on renewed engagement with global investors ahead of the Budget, where Reeves is expected to frame trade expansion as central to her “pro-growth” narrative
– The UK’s post-Brexit trade re-alignment remains a long-term challenge, and closer Gulf ties could help offset sluggish domestic demand
– Economists, however, caution that trade deals take time to translate into growth and that fiscal clarity at home remains critical to sustaining investor confidence
8 November 2025: UK Treasury eyes £2 billion hit on retirement-savings tax reliefs
– The Treasury is reportedly preparing changes to salary-sacrifice pension schemes that could raise about £2 billion annually by limiting tax advantages for higher earners, as Chancellor Rachel Reeves seeks new revenue sources before the upcoming Budget
– The plan targets high-income employees who currently benefit most from pre-tax pension contributions, aiming to create a fairer system while helping plug the government’s growing fiscal gap
– Pension industry groups have warned that the changes could discourage long-term savings and reduce workplace pension participation, especially among senior professionals who rely heavily on these schemes for retirement planning
– Treasury officials maintain the reform would improve equity in the tax system and bolster fiscal credibility as Reeves balances revenue-raising measures with the need to support economic stability amid weak growth and rising borrowing costs
7 November 2025: Global trade softens, new export orders shrink for UK-linked firms
– The global new export orders index compiled by S&P Global fell to 48.5 in October from 49.7 in September, signalling reinforcing contraction in trade – a head-wind for the UK
– UK exporters, already dealing with post-Brexit frictions and elevated energy costs, are facing weaker demand abroad, which could weigh further on growth and investment in tradable sectors
– The downward trade trend puts added pressure on domestic demand drivers, meaning the UK will rely more heavily on internal recovery – which is already weak
– The timing is challenging: with the Budget upcoming, trade softness reduces scope for fiscal loosening and heightens the risk that any major tax or spending changes could destabilise confidence
7 November 2025: Pound set for third consecutive weekly fall versus euro and dollar
– The British pound is heading for its third straight weekly loss against both the U.S. dollar and the euro, reflecting market caution over the Bank of England’s decision to hold rates steady amid signs of weakening UK growth
– Sterling fell to around $1.3105 and 88.10 pence per euro, down roughly 0.5% for the week. Traders cited a stronger U.S. dollar and growing expectations of fiscal tightening in the UK’s upcoming Budget as key headwinds
– Analysts noted that investors are shifting towards safer assets, with risk sentiment dampened by global growth concerns and uncertainty over how far the UK government will go in raising taxes to restore fiscal balance
– Currency strategists expect sterling to remain under pressure in the short term, with market focus now turning to UK inflation data and Chancellor Rachel Reeves’ Budget measures that could reshape investor confidence in the pound
7 November 2025: UK Chancellor Rachel Reeves faces £20bn hit to the UK public finances from productivity downgrade
– The Office for Budget Responsibility (OBR) has warned that a downward revision to the UK’s productivity outlook could leave Chancellor Rachel Reeves facing a £20 billion shortfall in the public finances ahead of the Budget. Weaker productivity means slower long-term growth in tax receipts and less fiscal room for new spending
– The downgrade complicates Reeves’ effort to balance fiscal discipline with investment-led growth, as the government already faces higher debt-servicing costs and soft corporate tax receipts. Economists suggest this could force tighter spending controls or selective tax rises
– The productivity hit highlights structural challenges such as low business investment, labour shortages, and regional inequality, all of which continue to drag on economic potential
– While Reeves remains committed to pro-growth reforms, analysts warn that unless productivity accelerates, the UK risks being locked into a low-growth, high-tax cycle
6 November 2025: UK business investment falls again in Q2 and confidence remains weak, BoE report
– The Bank of England November Monetary Policy Report noted business investment fell 1.1% in Q2 2025 on the quarter, though still 3% above a year earlier
– Survey indicators of investment intentions remain subdued, reflecting elevated uncertainty among firms ahead of the Budget and weak demand conditions
– The report showed underlying employment growth was close to zero and highlighted structural headwinds such as low productivity, high cost burdens, and weaker global demand
– While monetary policy may eventually ease, the weak investment backdrop signals that productivity and growth remain at risk – raising questions for fiscal-policy makers
6 November 2025: Carmakers slam UK’s plan for EV pay-per-mile tax
– Major automakers have criticised the UK government’s proposal to introduce a pay-per-mile tax on electric vehicles, warning it could undermine EV adoption just as sales momentum begins to slow. The policy aims to replace lost fuel duty revenue as petrol and diesel use declines
– Industry groups, including the Society of Motor Manufacturers and Traders (SMMT), argued the move risks deterring consumers from switching to EVs and could jeopardise the UK’s 2035 zero-emission targets if implemented prematurely
– The Treasury is reportedly considering mileage-based levies tied to vehicle telematics or MOT data, though privacy and implementation costs remain major concerns. Ministers insist the tax will ensure “fairness” between EV and petrol car drivers as revenues shrink
– Analysts said the backlash highlights the tension between climate policy and fiscal needs. While the measure could generate billions in revenue, critics argue it sends mixed signals about the UK’s green transition strategy at a crucial stage for investment and consumer confidence
6 November 2025: Bank of England opens door to December rate cut after holding rates at 4%
– The Monetary Policy Committee unanimously voted to hold the Bank Rate at 4%, but Governor Andrew Bailey signalled that inflation may have peaked, opening the prospect of a rate cut in December
– The decision follows subdued GDP growth, soft labour-market signals and easing cost pressures – factors that encouraged the Bank to pause and adopt a “wait-and-see” stance rather than tightening further
– Markets responded positively: gilt yields fell and expectations of a December cut strengthened, providing some relief to firms under financing pressures ahead of the Budget
– However, the Bank warned that the path to lower rates is not assured – inflation remains above target and the UK’s productivity and investment weaknesses could complicate the outlook
6 November 2025: UK construction activity falls at fastest pace for five years
– The S&P Global UK Construction PMI plunged to 44.1 in October, down from 46.2 in September, marking the steepest contraction in over five years and the tenth consecutive month of decline
– The drop spanned all sub-sectors, with civil engineering falling to 35.4 and commercial building hitting 46.3. Delayed project approvals, weak demand and elevated policy uncertainty were flagged as key drag factors
– Analysts warn the sector’s slump could weigh on Q4 GDP growth and delay recovery in investment and jobs. Construction is often a leading indicator of broader economic strength
– With the upcoming Budget and interest rate decisions looming, the construction downturn raises fresh questions about the UK’s growth momentum and the ability of fiscal or macro policy to offset structural weakness
5 November 2025: UK services activity ticks higher in October amid resilient demand
– The UK Services PMI rose to 52.3 in October, up from earlier estimates and indicating modest expansion in the services sector
– The up-tick suggests consumer and business services are still holding up despite cost pressures and weak business investment. Firms reported stable demand growth and slight easing in input-cost inflation
– While the services rebound is welcome, manufacturing and construction remain weak, meaning the overall economy still lacks balance and strength
– The read-through for policy is mixed: the Bank of England and Treasury may gain some confidence from the services uptick, but broader weakness means growth remains vulnerable
5 November 2025: UK Chancellor Rachel Reeves set to spare UK banks from Budget tax raid
– Chancellor Rachel Reeves is expected to avoid major tax hikes on UK banks in the upcoming Budget, easing fears of a “windfall-style” levy that could have hit sector profitability. The decision reflects Treasury efforts to maintain financial stability amid slowing economic growth
– The banking sector, which has benefited from higher interest rates over the past two years, had been bracing for potential increases in the Bank Surcharge or corporation tax rate. Instead, officials are said to favour preserving London’s competitiveness as a global financial hub
– Industry figures welcomed the move, noting that additional taxation could have discouraged lending and weakened investment flows into the UK economy. Analysts said the decision signals a pragmatic stance aimed at balancing fiscal consolidation with market confidence
– However, critics argue the exemption places more burden on households and smaller businesses to fund fiscal tightening. Reeves is still expected to target other high-revenue sectors, such as pensions and property, to meet her £20–30 billion fiscal gap
4 November 2025: UK business investment intentions stay weak, BoE reports
– In its November Monetary Policy Report, the Bank of England noted that business investment intentions remain around 2% below their late-2019 level, citing high uncertainty and weak demand
– Firms surveyed by the BoE’s Agents reported low confidence, with many delaying investments amid unclear policy signals and cost headwinds from labour and regulation
– The report also highlighted that underlying employment growth is near zero and that investment weakness is one of the key constraints on the UK’s productivity and growth outlook
– Policymakers face the downside risk that without a turn in investment, the country’s long-term growth potential remains capped and fiscal head-room further eroded
4 November 2025: Rachel Reeves to urge insurance bosses to increase investment in London
– Chancellor Rachel Reeves is set to meet top insurance executives this week to encourage greater investment in UK infrastructure, innovation, and growth-focused London projects, as part of her push to channel more private capital into the domestic economy
– The talks, involving major players such as Aviva, Legal & General, and Phoenix Group, aim to accelerate commitments under the Mansion House Compact – a pledge by insurers to invest billions into UK private markets and green transition initiatives
– Treasury sources said Reeves will emphasise London’s role as a “magnet for long-term capital” and highlight how regulatory reforms can help insurers deploy more funds into housing, clean energy, and technology sectors
– Analysts view the move as a strategic effort to boost business confidence and counter criticism that the government’s fiscal tightening is choking growth. However, insurers have warned that clear rules and predictable returns are essential before expanding exposure to UK assets
4 November 2025: UK accused of being too slow to regulate cloud service providers
– Technology and cybersecurity experts have criticised the UK government for delaying regulatory action on dominant cloud service providers such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud, warning that slow progress risks stifling competition and innovation
– The Competition and Markets Authority (CMA) has been reviewing the £7.5 billion cloud services sector since 2023 but is yet to implement concrete measures, despite identifying barriers like restrictive pricing and data transfer fees that lock customers into specific platforms
– Industry analysts say the lack of clear regulation leaves UK businesses exposed to high costs and potential data sovereignty risks, particularly as more critical sectors, including healthcare and finance – migrate operations to cloud-based infrastructure
– Lawmakers and digital rights groups have urged the Treasury and the Department for Science, Innovation and Technology (DSIT) to accelerate oversight reforms, arguing that the UK risks falling behind the EU and US, which have moved faster to ensure fair competition and cloud resilience
4 November 2025: UK stocks sink as Rachel Reeves prepares UK for a tough Budget
– UK equities fell sharply as investors braced for a fiscally tight Budget from Chancellor Rachel Reeves, with expectations of tax rises and constrained public spending weighing on sentiment across the FTSE 350
– The FTSE 100 dropped around 0.8%, led by declines in consumer goods, retail, and financial stocks, as markets reacted to reports suggesting Reeves is considering higher national insurance and pension-related tax reforms
– Analysts said investor caution reflects concerns that aggressive fiscal consolidation could dampen demand and corporate earnings, particularly in domestic sectors sensitive to household income pressures
– Despite the pullback, strategists noted that longer-term stability measures could help improve gilt market confidence and strengthen the pound, providing a potential foundation for recovery once fiscal clarity emerges post-Budget
3 November 2025: Tax rises and drop in investment predicted to curb UK growth next year
– The EY ITEM Club forecast upgraded 2025 growth to 1.5% but expects just 0.9% in 2026 due to tax rises and weak investment
– The group expects business investment growth to fall from 3.7% in 2025 to 0.8% in 2026, amplifying the productivity problem facing the UK
– The predicted slow growth will weigh on tax receipts and borrowing, increasing pressure on the Chancellor to plug a large fiscal gap
– With borrowing costs higher and growth weak, the scenario raises the spectre of “low-growth, high-tax” equilibrium unless policies shift
UK Financial Services Key Transactions
10 November 2025: Lazard Predicts Wave of IPOs in London Next Year
– Lazard’s UK investment banking head predicts a surge of large and mid-sized IPOs in London as several private-equity-owned companies grow too large to remain private; he views London as the “natural destination” for listings amid fading US appeal and regulatory reforms enhancing UK attractiveness
10 November 2025: W1M Set to Seal Deal for £2bn DFM Vermeer
– London-based wealth firm W1M (formerly London & Capital/Waverton) is nearing a transaction to acquire Vermeer Partners, a discretionary fund manager overseeing about £2 billion in assets. The deal is understood to value Vermeer at around £40 million, boosting W1M’s scale and advisory capabilities in the UK
6 November 2025: Insly acquires UK boutique insurance-technology firm Socrates Systems
– Global insurance-software provider Insly has acquired UK-based “boutique” insurtech Socrates Systems, aiming to integrate its specialist workflow and data-logic tools into Insly’s platform and deepen its offering for under-served SME insurance brokers and carriers in the UK & Ireland
5 November 2025: Two UK specialty MGAs merge following FCA approval
– UK specialty insurance broker-underwriters Nirvana MGA and Pulse MGA have completed their merger after receiving approval from the Financial Conduct Authority. The combined entity aims to become a stronger platform for experienced underwriters, enhance team hiring and execution capabilities, and expand its specialty lines across the UK market
5 November 2025: Starr Insurance to Acquire IQUW Group in Major Lloyd’s-Market Deal
– Starr Insurance has agreed to acquire IQUW Group, which writes about US$1.9 billion in gross written premiums and operates syndicates IQUW and ERS within the Lloyd’s of London market. The acquisition will make Starr’s managing agency the ninth-largest at Lloyd’s, expand its footprint in the UK retail motor, Bermuda reinsurance and London wholesale markets, and position the combined entity for global underwriting growth
5 November 2025: £2bn DFM built by former Quilter Cheviot team looks for buyer
– A discretionary fund management business established seven years ago by a team that left Quilter Cheviot is seeking a buyer, with around £2 billion in assets under management and engaging advisers to explore options amid evolving market conditions
5 November 2025: Manchester-based broker completes buy-out of non-standard broker that entered administration
– Manchester-based broker Principal Insurance Limited acquired the business of non-standard broker Peart Performance Marque, which had ceased trading and entered administration. The “pre-pack” purchase enabled continuity of cover for clients and transferred key staff into Principal’s specialist non-standard motor book
A Word from Our Founder & Managing Director
Recent developments underscore the UK’s recurring challenge: balancing fiscal discipline with ambition for sustainable growth. While policy credibility is rewarded by markets, true confidence relies on clear strategic vision. As the November Budget approaches, decisive action on productivity, investment, and policy clarity will be pivotal in shaping the economic outlook. In this environment, those who combine rigorous strategy with measured boldness are best placed to capture opportunities amidst market volatility. At HSA Advisory, volatile markets are not simply a risk, they’re an opportunity to create long-term value. As fiscal tightening redefines the financial landscape, clarity of purpose and proactive strategic positioning become paramount. The focus is on guiding clients through uncertainty, helping them identify value, manage risks, and seize growth prospects in a changing environment
Himanshu Singh, Founder & Managing DirectorPulse Check
With the UK economy facing a delicate balancing act between fiscal restraint and growth ambition, attention now turns to Chancellor Reeves’ forthcoming Budget to restore investor confidence. The key question remains: can fiscal prudence and targeted investment unlock sustainable growth, or will policy uncertainty continue to cloud the UK’s recovery momentum?
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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