Key Points from the Week:
High street pressures intensified as retailers warned that higher energy, rent and tax burdens are eroding already thin margins amid weak footfall, forcing closures and job cuts as employer costs rise. With limited pricing power and ongoing UK‑EU trade frictions constraining exporters’ ability to scale in Europe, investment and productivity prospects remain subdued.
Markets reflected this divergence, with the FTSE lagging while US equities set new record highs, underscoring differing growth trajectories. Sterling, however, firmed against a softer dollar, supported by relatively resilient rate expectations and tentative signs of domestic stabilisation.
In financial services, banks continued to pull back from capital‑intensive lines, while demand for scalable, capital‑light, fee‑based wealth and platform models stayed robust.
Welcome to HSA Advisory’s Financial Services Newsletter, your concise roundup of UK macroeconomic developments and financial services transactions.
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UK Macroeconomics
28 December 2025: Soaring costs and taxes push more high street firms to the brink
– UK high street businesses are facing intensifying financial strain as higher operating costs and rising taxes erode already thin margins. Retailers say energy bills, rents and wage pressures are overwhelming cash flows amid subdued consumer demand
– Business owners warn that recent tax changes have compounded cost pressures at a fragile moment. Increased employer charges and levies are limiting the ability to absorb shocks, forcing firms to cut staff, scale back openings or consider closure
– Analysts note that weaker footfall and cautious household spending have reduced pricing power. Many smaller retailers lack the scale to renegotiate leases or pass costs on, leaving them disproportionately exposed to prolonged margin compression
– Industry groups caution that without targeted relief or policy support, closures could accelerate in the new year. They argue sustained high costs risk hollowing out town centres, with knock-on effects for employment and local economic activity
24 December 2025: FTSE lags as Wall Street hits record highs on strong GDP growth figures
– UK equities underperformed as Wall Street rallied to record highs, driven by stronger-than-expected US growth data. Investors rotated toward US assets, viewing American economic momentum as more resilient than the UK’s slowing domestic outlook
– The FTSE lagged despite global risk appetite improving, with weak UK growth indicators and recent fiscal tightening continuing to weigh on sentiment. Cyclical and consumer-facing stocks struggled to attract inflows amid subdued earnings expectations
– Analysts said the divergence reflects contrasting growth trajectories, with the US benefiting from robust demand while the UK faces headwinds from higher taxes, softer consumption and cautious business investment following the Autumn Budget
– Strategists warned the gap could persist unless UK data improve or monetary easing provides clearer support. Near-term FTSE performance is likely to remain constrained by domestic fundamentals rather than global equity momentum
24 December 2025: Valuation uplift provides a positive end to the year for private equity
– Private equity portfolios saw a late-year valuation uplift, reflecting stabilising interest-rate expectations and improving sentiment toward risk assets. The rebound helped offset earlier write-downs caused by higher discount rates and cautious pricing earlier in the year
– Fund managers said easing financing conditions and stronger public-market comparables supported re-ratings, particularly in technology, healthcare and infrastructure assets. Improved exit visibility also contributed to more optimistic assumptions around medium-term value realisation
– Analysts noted the uplift does not signal a full recovery, as deal volumes and exits remain subdued. Valuations are still conservative, with buyers and sellers cautious on leverage, growth assumptions and macroeconomic uncertainty
– Investors welcomed the improvement as a confidence boost heading into the new year. However, sustained performance will depend on rate cuts translating into stronger M&A activity, reopening exit markets and supporting earnings growth across portfolio companies
23 December 2025: UK-EU trade deal fails to help businesses expand in Europe
– UK companies say the post-Brexit trade framework has done little to support expansion in European markets. Firms report continued friction, with customs paperwork, regulatory divergence and border delays limiting their ability to scale exports efficiently
– Surveys from the British Chambers of Commerce show many exporters have reduced EU ambitions, citing higher compliance costs and uncertainty. Smaller firms are disproportionately affected due to limited resources to manage complex trade requirements
– Business leaders argue that while the trade deal avoided disruption, it has failed to deliver growth opportunities. The lack of mutual recognition and services access remains a major constraint on deeper commercial engagement
– Analysts warn persistent barriers risk reshaping UK trade patterns away from Europe. Without targeted simplification or improved cooperation, exporters may struggle to compete, weighing on investment, productivity and the UK’s longer-term growth prospects
23 December 2025: Sterling rises to 12-week high versus weaker dollar
– Sterling climbed to its strongest level in nearly three months against a broadly weaker dollar, as investors reassessed relative monetary policy paths and responded to tentative signs of stabilisation in UK economic activity
– Traders cited modestly improved business surveys and easing financial conditions as “green shoots” supporting the pound. However, gains were tempered by caution over still-elevated domestic inflation and uncertainty around the pace of further monetary easing
– Analysts said dollar softness played a significant role, with markets pricing a more accommodative stance from the US Federal Reserve. The relative resilience of UK rate expectations helped sterling outperform despite slower growth at home
– Currency strategists warned that sterling’s upside may remain capped unless inflation continues to cool convincingly. Persistent price pressures could keep the Bank of England cautious, limiting the scope for sustained currency appreciation
UK Financial Services Key Transactions
28 December 2025: Lloyds shuts invoice financing service as small businesses feel squeeze
– Lloyds Banking Group has closed its invoice-financing service as it shifts capital toward higher-margin corporate and institutional clients. The withdrawal tightens funding options for SMEs already facing weaker demand and rising costs, with analysts citing regulatory burdens and risk concerns, while business groups warn reduced bank support could curb investment, hiring and broader economic momentum
24 December 2025: UK banks make second round of Evelyn auction
– Barclays, NatWest and Royal Bank of Canada are reported to have progressed to the second round of the auction for Evelyn Partners, the £67 billion wealth manager. Continued bank interest underscores the strategic appeal of scaled UK advice platforms offering recurring revenues, affluent client exposure and capital-light growth opportunities amid ongoing sector consolidation
24 December 2025: Secure Trust to sell motor finance business to LCM Partners
– Secure Trust Bank has agreed to sell its consumer motor finance arm to funds managed by LCM Partners, marking a strategic retreat from capital-intensive lending. The disposal improves capital flexibility, reduces exposure to cyclical and regulatory risks tied to motor finance, and allows management to refocus on core banking and specialist savings activities amid ongoing consolidation pressures
A Word from Our Founder & Managing Director
This week underlined a widening fault line in the UK economy. Capital is still gravitating toward scalable, asset-light platforms, even as pressure on SMEs and high street operators continues to build. Unless access to finance improves and cost pressures begin to ease, there is a real risk that cyclical retrenchment hardens into lasting structural damage. At HSA Advisory, the focus remains on guiding owners and management teams through this environment with clarity, agility and senior-led judgement. Whether you are assessing cross-border growth, weighing potential acquisitions or preparing for a capital raise, the aim is to help convert uncertainty into strategic opportunity.
Himanshu Singh, Founder & Managing DirectorPulse Check
As rising costs, higher taxes and tighter bank lending converge, can UK high street businesses stabilise in 2026 without targeted policy or alternative financing support?
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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