Key Points from the Week:
UK markets had a mixed start to the year, swinging between optimism and caution. The FTSE briefly climbed above 10,000 before easing back as geopolitical tensions, commodity swings, and softer risk appetite took hold. Sterling strengthened on improving fiscal signals and renewed confidence in European relations but remains vulnerable as global sentiment turns risk-averse and wage growth keeps the Bank of England cautious.
Despite the wider uncertainty, UK financial services deal-making remains highly active. Wealth management, insurance broking, and specialty underwriting continue to consolidate, while FinTech, ESG, and data-led platforms are drawing strong investor interest. Strategic buyers and private equity firms are clearly positioning for a lower-rate environment even as the macro backdrop stays fragile.
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
12 January 2026: UK employers report weaker hiring but stronger pay growth in December
– UK hiring activity weakened in December, indicating a cooling labour market as employers became more cautious amid slowing growth, higher taxes and uncertainty over demand across several key sectors of the economy
– Despite softer recruitment, starting salaries for permanent roles rose at a faster pace, reflecting ongoing skills shortages and efforts by firms to retain talent even as overall employment growth slows
– The data will be closely watched by the Bank of England, as persistent pay growth could keep services inflation elevated and complicate decisions over the timing and scale of further interest-rate cuts
– Economists said the mixed picture points to a gradual rebalancing rather than a sharp downturn, but warned that if hiring continues to weaken while wages stay firm, pressure on business margins and inflation could persist
12 January 2026: Commodity rally fails to lift FTSE as US-Iran tensions weigh
– Commodities, particularly oil, have been rallying on fears of supply disruption linked to escalating tensions involving Iran, where unrest and potential US action have added a geopolitical risk premium to energy markets. Brent crude climbed near two-month highs
– Despite stronger oil and energy stocks lifting broader commodity prices, London’s FTSE 100 failed to show meaningful gains. Investor caution prevailed as geopolitical uncertainty and weak domestic growth data dampened risk appetite
– Analysts said the FTSE’s muted response reflects a broader risk-off tone, with traders balancing commodity strength against fears that conflict could impede global growth and disrupt trade. Safe-haven demand also supported gold and defensive sectors
– Markets are watching closely for further developments in the Middle East and data that could influence global monetary policy. Continued uncertainty over Iran’s response and wider geopolitical dynamics may keep equities under pressure even as commodity prices remain elevated
12 January 2026: EU demands ‘Farage clause’ in talks over Brexit reset
– The European Union has reportedly insisted on a so-called “Farage clause” in negotiations with the UK, aimed at protecting any new Brexit reset agreement from being unravelled by a future government led by Eurosceptic forces
– EU officials are said to want legal safeguards that would lock in regulatory and market-access commitments, reflecting concern that a change in UK political leadership could see parts of a revised deal rapidly reversed
– The demand highlights lingering mistrust between Brussels and London after years of post-Brexit turbulence. European negotiators want greater certainty before offering concessions on trade, mobility or regulatory cooperation
– UK ministers face a delicate balance, as agreeing to such a clause could provoke political backlash at home while rejecting it risks slowing progress on improving relations with the EU, including in areas such as trade, investment and labour mobility
10 January 2026: Spending on consultants cut by 14% across UK government
– UK government departments have reduced spending on consultants by fourteen per cent, as ministers seek to rein in costs after consultancy bills surged during the Brexit process and the Covid pandemic
– Officials said internal capabilities have improved, allowing more policy, technology and project work to be handled in-house rather than outsourced to expensive advisory firms
– The cuts form part of a broader effort to demonstrate fiscal discipline ahead of future spending reviews, with pressure growing to show value for money across public-sector operations
– Critics warned that excessive reductions could weaken delivery of complex programmes, arguing that specialist external expertise is still needed for major infrastructure, digital transformation and regulatory projects
9 January 2026: UK to exclude financial services from push for closer EU alignment
– The UK government has decided to keep financial services outside its efforts to move closer to EU rules, reflecting concerns that re-alignment would constrain regulatory flexibility and undermine the City of London’s global competitiveness
– City firms have lobbied strongly against a return to Brussels-style regulation, arguing that the UK’s post-Brexit framework allows more proportionate, innovation-friendly oversight tailored to domestic market conditions
– Ministers said excluding finance from alignment talks preserves the UK’s ability to set its own rules for banking, capital markets and fintech, while still pursuing improved trade and cooperation with the EU in other sectors
– Analysts said the move reassures investors in UK financial services but limits prospects for easier market access into Europe. The trade-off reflects the government’s priority of regulatory autonomy over deeper integration with EU financial markets
9 January 2026: Markets signal a brighter UK future after lost decade
– Financial markets are showing renewed optimism about the UK after years of underperformance, with stronger equity prices, a firmer pound and falling borrowing costs suggesting investors believe the country may be turning a corner
– Improved fiscal discipline, easing inflation and expectations of lower interest rates have helped restore confidence, encouraging global investors to revisit UK assets after a prolonged period of scepticism following Brexit and repeated political shocks
– Analysts say the shift reflects growing belief that the worst of the economic adjustment is over, though growth remains modest and structural challenges persist across productivity, investment and public services
– Markets caution that optimism could fade without sustained reform and policy stability. A durable recovery will depend on whether improved sentiment translates into higher business investment, stronger productivity and a more competitive UK economy
8 January 2026: Sterling on track for third straight daily fall versus dollar
– Sterling was set for a third consecutive decline against a strengthening US dollar, as investors reduced exposure to riskier currencies amid falling global risk appetite and renewed demand for safe-haven assets
– Traders said the pound has lost momentum following its recent rally, with concerns over the UK’s growth outlook and fiscal tightening making sterling more vulnerable when global markets turn cautious
– The stronger dollar reflected broader risk aversion and expectations that US interest rates will remain relatively high, reducing the attractiveness of currencies linked to economies facing weaker activity or policy uncertainty
– Analysts warned that further sterling weakness could follow if UK data disappoints or if financial market volatility increases, as currency flows remain highly sensitive to shifts in global risk sentiment
8 January 2026: FCA to implement four-point ‘traffic light’ system for pension fund performance
– The Financial Conduct Authority plans to introduce a four-point “traffic light” system to rate pension fund performance, aiming to give savers clearer, simpler insight into how well their money is being managed
– Funds will be graded based on value for money, investment performance and cost efficiency, allowing consumers to quickly compare schemes and identify those delivering weaker outcomes
– Regulators hope the framework will increase competitive pressure on underperforming providers, encouraging fee reductions, improved governance and stronger long-term investment strategies
– Industry groups welcomed greater transparency but warned that simplified ratings must reflect long-term investment horizons, arguing that short-term performance snapshots risk misleading savers about the true quality of pension funds
7 January 2026: Reform UK councils unveil plans for tax rises and service cuts
– Councils controlled by Reform UK have announced plans to raise local taxes and cut spending, citing mounting financial pressures and growing service demand. Leaders said deteriorating budgets leave limited scope to maintain services without increasing revenue
– The party now controls nine English councils and leads three minority administrations following last year’s local election gains. Officials argue they inherited fragile finances and rising costs, forcing difficult trade-offs between fiscal stability and local service provision
– Opposition councillors accused Reform UK of abandoning its low-tax platform, warning that higher council tax and reduced services will hit households hardest. Critics said the plans undermine voter trust and expose the limits of protest-party politics in government
– Analysts said the episode highlights the severe funding squeeze facing local authorities across England. Regardless of political control, councils are struggling with shrinking central support, rising social care costs and limited flexibility to balance budgets without unpopular decisions
7 January 2026: Tory MP wants pension charge cap lifted to unlock private markets
– A Conservative MP has called for the UK’s pension charge cap to be raised, arguing that current limits restrict schemes from investing in higher-growth private market assets such as infrastructure, private equity and venture capital
– Supporters say loosening the cap would allow pension funds to access illiquid investments with potentially stronger long-term returns, helping to boost retirement outcomes while also directing more capital into UK businesses and growth sectors
– Critics warned that higher charges could erode savers’ pots if not matched by better performance. Consumer groups argue any reform must include strict value-for-money tests and safeguards to prevent excessive fees
– Analysts said the proposal reflects a broader push to mobilise pension capital for economic growth. However, success will depend on governance, transparency and ensuring retail savers share in the benefits of higher-risk, higher-return investments
7 January 2026: UK ministers cut estimated annual cost to business of workers’ rights act to £1bn
– The government has sharply reduced its estimate of the annual cost of its flagship workers’ rights legislation, cutting the figure from £5bn to £1bn, arguing that earlier projections overstated the compliance burden on employers
– Ministers said updated modelling shows firms will adapt more efficiently to the new rules, with lower administrative and legal costs than initially assumed. The revision is intended to reassure businesses concerned about the impact on hiring and competitiveness
– Business groups remain sceptical, warning that the true cost may still prove higher once changes to dismissal rules, flexible working and enforcement are fully implemented. They argue smaller firms in particular could face disproportionate burdens
– Analysts said the downgrade may ease political pressure on the government but is unlikely to eliminate concerns about labour-market rigidity. The ultimate impact will depend on how the rules are enforced and how companies adjust their employment practices
6 January 2026: Sterling at highest since mid-September against dollar and euro
– Sterling rose to its strongest level in almost four months against both the dollar and the euro, supported by improved global risk appetite and easing concerns about Britain’s fiscal outlook following recent budget and policy signals
– Currency traders said calmer bond markets and reduced fears of aggressive UK tax rises have helped stabilise sentiment toward sterling, encouraging investors to rebuild positions that were cut during earlier periods of fiscal uncertainty
– Hints that Britain may pursue a closer relationship with Europe also boosted the pound, as markets interpreted this as reducing long-term trade and investment frictions that have weighed on the UK economy since Brexit
– Analysts cautioned that the rally remains vulnerable to domestic data and central-bank guidance. Sustained strength will depend on whether improved sentiment is backed by firmer growth and continued progress on inflation
UK Financial Services Key Transactions
12 January 2026: W1M seals deal for £2bn DFM built by Cheviot team
– W1M has agreed to acquire Vermeer Capital Partners, a £2 billion discretionary fund manager founded by a former Cheviot team, marking its first acquisition since the Waverton and London & Capital merger in July 2024 and signalling renewed inorganic growth to add specialist investment capability and scale
12 January 2026: Nexus Underwriting acquires medical travel insurance MGA
– Nexus Underwriting has acquired a medical travel insurance managing general agent, expanding its specialty underwriting portfolio to include niche travel-health risks. The deal enhances Nexus’s delegated authority footprint, broadens product diversification and positions the business to capitalise on growing demand for tailored international medical and travel insurance solutions
9 January 2026: SRG strengthens UK retail presence with acquisition of Hull and Leeds based broker
– Specialist Risk Group (SRG) has acquired a retail insurance broker with operations in Hull and Leeds, reinforcing its UK retail footprint. The deal expands SRG’s regional distribution, broadens its personal and commercial lines offerings, and supports its strategic growth objectives in competitive local
8 January 2026: M&A advisers hit back at PE house in £15m fight over HL takeover
– Addere Capital is pursuing a £15 million success fee from private equity firm Nordic Capital over its role in the takeover of Hargreaves Lansdown, sparking a high-profile dispute. The case highlights growing tensions around advisory fees in mega-deals, as complex buyouts generate scrutiny over mandates, value creation and the allocation of transaction economics
8 January 2026: Specialist motor MGA secures new capacity deal with Zurich worth over £2bn GWP
– A specialist motor managing general agent has agreed a new multi-year capacity arrangement with Zurich that will support underwriting of more than £2 billion in gross written premium. The expanded deal enhances delegated authority, broadens product reach across private and commercial motor lines, and reinforces collaborative underwriting partnerships in the UK motor insurance market
8 January 2026: Zilch agrees Fjord Bank acquisition to expand across Europe
– Buy-now-pay-later fintech Zilch has agreed to acquire Norwegian bank Fjord Bank as part of its European expansion strategy, combining Zilch’s consumer lending technology with a banking licence to accelerate growth across the region. The deal aims to broaden product offerings, deepen regulatory reach and enhance competitive positioning in the continental digital finance market
8 January 2026: E-commerce firm Swap raises $100m in Series C round
– E-commerce platform Swap has secured $100 million in a Series C funding round to accelerate product innovation, expand into new markets and forge strategic partnerships across its marketplace ecosystem. The capital injection will support technology development, enhance customer and merchant experiences, and fuel scalable growth amid intensifying competition in online commerce
8 January 2026: Diginex acquires Plan A to build integrated ESG platform
– Fintech and sustainability tech firm Diginex has acquired Plan A – a climate-data and ESG-analytics provider, to create a fully integrated platform for environmental, social and governance solutions. The combined business aims to offer end-to-end ESG data services, streamline corporate reporting, and support investors and enterprises with actionable insights as demand grows for measurable sustainability performance tools
7 January 2026: Brooks Macdonald merges investment and sales teams amid senior exits
– Brooks Macdonald has combined its investment and sales functions as part of an internal restructure following the departure of four senior executives. The changes aim to streamline operations, improve client alignment and support digital transformation, including the appointment of a new permanent chief technology officer, as the wealth manager navigates organisational upheaval and competitive pressures
7 January 2026: Jensten Group kicks off 2026 with trio of acquisitions
– Jensten Group has completed three acquisitions to start 2026, expanding its UK broker network across key regions and specialty segments. The deals enhance its commercial and personal lines capabilities, strengthen local distribution, and reflect continued momentum in strategic consolidation as broker groups pursue scale and broader service offerings
7 January 2026: Gallagher expands aerospace practice with AssuredPartners integration
– Gallagher has integrated AssuredPartners’ aerospace and aviation teams into its global aerospace practice, bringing nearly 600 specialist risk professionals into the division worldwide. The move significantly deepens technical expertise, expands global coverage and strengthens Gallagher’s ability to serve complex aviation and space-related risks for multinational clients across a highly specialised insurance segment
6 January 2026: Verlingue acquires Cambridge-based employee benefits specialist
– Verlingue has acquired a Cambridge-based employee benefits and HR risk specialist, expanding its UK service capabilities in group risk, benefits consulting and workforce solutions. The transaction strengthens Verlingue’s regional presence, broadens its corporate client base and reflects ongoing consolidation among employee-benefits brokers seeking scale and differentiated expertise
6 January 2026: Redington wins Tatton’s £3bn Perspective mandate
– Redington has secured the £3 billion Perspective model portfolio service mandate, replacing Tatton after more than a decade. The win represents a significant shift in one of the UK’s largest MPS relationships, strengthening Redington’s position in outsourced investment solutions and highlighting increasing competition among asset managers to capture large, recurring advisory-platform mandates
A Word from Our Founder & Managing Director
The contrast in today’s markets really stands out. Public markets are being pulled by geopolitics, currency swings, and changing rate expectations, while in private markets, it’s all about strategy, scale, and long-term positioning. Despite the volatility, we continue to see buyers backing businesses with strong client relationships, specialist capabilities, and steady, recurring revenues. To me, that shows confidence in UK financial services hasn’t disappeared, it’s just become more selective. In times like these, the firms that succeed are those combining resilience with relevance, not simply waiting for conditions to turn. At HSA Advisory, our focus is on helping clients stay ahead of that curve navigating this shifting landscape with clarity, adaptability, and the benefit of senior-led insight. Uncertainty will always be part of the picture, but with the right approach, it can become a real source of strategic advantage.
Himanshu Singh, Founder & Managing DirectorPulse Check
Is the UK entering a sustainable recovery phase, or are markets getting ahead of an economy still constrained by geopolitics, wages and policy uncertainty?
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.
Stay informed with our weekly updates on the UK’s financial landscape, providing you with the insights needed to navigate the evolving economic environment
