Key Points from the Week:
The UK economy entered the final stretch of September with resilience increasingly tested by renewed inflationary pressure and a global bond rout that is tightening financial conditions at a critical moment. Sterling recovered modestly as markets priced an 85% probability of a Bank of England rate increase in November, lifting Base Rate from 3.75% to 4%. Higher oil and natural gas prices have intensified concerns over second-round inflation effects, with the BoE expecting CPI to reach around 3.7% in Q4 and 4.2% in early 2027. Deputy Governor Clare Lombardelli signalled that tightening is becoming more likely if the energy shock persists, while Governor Bailey continued to stress the uncertainty around the policy path. September’s composite PMI fell to 51.7, pointing to only modest economic expansion, while employment continued to weaken. ONS revisions showing post-Covid economic inactivity was much lower than previously thought offered a more constructive read on the labour market’s underlying health, but the near-term picture remains soft. August borrowing reached £18.3bn, £3.5bn above the OBR forecast, further narrowing Chancellor Healey’s fiscal flexibility ahead of the 28 October Budget, compounded by a reported £1.6bn hit from Labour’s failed housebuilding programme
Financial services continued to demonstrate significant strategic activity despite the more challenging backdrop. Wealth management remained a major focus, with Corient joining the potential bidders for W1M and Warburg Pincus and Clayton Dubilier & Rice reportedly progressing discussions to acquire Canaccord Wealth in a potential £1bn-plus transaction, underscoring the sustained appetite among global private equity for scaled UK wealth platforms. Pollen Street is exploring strategic options including a potential take-private, while technology and financial infrastructure activity also remained strong, with CellPoint securing £25m from Toscafund for its AI payments platform, OneClickComply raising £1m for automated cyber compliance and Outerlimit securing £12m in pre-seed funding. UK banks completing their first interbank transactions using tokenised deposits marked a significant milestone in the shift toward blockchain-enabled financial infrastructure.
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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 September 2026: Post-Covid economic inactivity in UK was much lower than thought, says ONS
– New ONS research suggests the post-pandemic rise in UK economic inactivity was substantially overstated, with employment recovering more strongly than Labour Force Survey data indicated. The findings challenge previous assessments of a uniquely severe UK workforce participation problem
– The research found employment rates were around 0.57 percentage points lower than the revised estimates between mid-2020 and end-2021, but around 0.42 percentage points higher between 2022 and 2024. This reflects changing non-response bias in the LFS
– Among 50- to 64-year-olds, published data previously showed inactivity reaching 27.4% at the end of 2022. The ONS research suggests the figure was closer to 25.9%, indicating older workers returned to employment more quickly than previously understood
– The findings could alter assessments of UK labour supply, potential growth and monetary policy, although the ONS stressed these are research estimates rather than revised official statistics. Further work is required before the methodology can be incorporated into headline labour-market data
28 September 2026: Sterling rebounds against dollar and euro on bets for tighter BoE policy
– Sterling rebounded from multi-month lows, rising 0.1% against the dollar to $1.3259 and 0.2% against the euro to 85.75 pence. The recovery followed growing market expectations that the Bank of England may tighten monetary policy
– Money markets were pricing an 85% probability of a 25-basis-point BoE rate increase in November, taking Bank Rate from 3.75% to 4%. Investors have responded to increasingly hawkish comments from policymakers amid persistent energy-driven inflation risks
– Higher oil and UK natural-gas prices have strengthened expectations of tighter policy, after energy costs accelerated again following renewed uncertainty around the Iran conflict. The prospect of prolonged energy inflation is increasing concerns about second-round effects on UK prices
– Despite Monday’s recovery, sterling remained on course for a monthly decline of more than 2% against the dollar as the US currency benefited from expectations of further Federal Reserve tightening. The pound’s outlook therefore remains closely tied to divergent central-bank policies
27 September 2026: Healey facing £1.6bn hit from Labour’s housebuilding shortfall
– Weak UK housebuilding threatens to eliminate much of the economic boost expected from the government’s planning reforms. Economists estimate the resulting downgrade to growth could reduce Chancellor John Healey’s fiscal headroom by at least £1.6bn ahead of October’s Budget
– The OBR previously estimated planning reforms would deliver 170,000 additional homes by 2029-30 and add 0.2% to GDP. Current industry data suggest construction could fall more than 400,000 homes short of the revised forecast
– High mortgage rates, weaker buyer affordability, planning delays and rising construction costs have undermined housing delivery. Housebuilders have warned that subdued demand and squeezed margins could lead to further reductions in construction, limiting the sector’s contribution to economic growth
– Housebuilders are pressing for measures including a revived Help to Buy-style equity-loan scheme, while the government highlights £39bn for social and affordable housing and a £16bn National Housing Bank. The Budget may determine whether additional support is introduced
25 September 2026: Iran-US ceasefire hopes buoy stocks but oil and yields yet to ease
– Global equities advanced as investors responded to signs of possible US-Iran negotiations and a phased route towards reopening the Strait of Hormuz. European shares rose, with the STOXX 600 gaining 0.6%, while global stocks headed for their strongest weekly performance since early August
– Oil prices retreated as negotiators explored a potential agreement involving Tehran reopening the Strait of Hormuz and Washington lifting its economic blockade. Brent nevertheless remained above $100 a barrel, highlighting continued uncertainty around Middle Eastern supply and shipping risks
– Bond markets remained under pressure despite the modest easing in crude prices. US 10-year Treasury yields stayed around 5.17% after reaching a post-financial-crisis high, while 30-year yields remained near 5.47%, reflecting persistent inflation and fiscal concerns
– Markets therefore treated diplomatic progress cautiously rather than as a definitive resolution. Continued Houthi attacks on Saudi Arabia and uncertainty over negotiations kept energy-supply risks elevated, leaving investors focused on whether lower oil prices can translate into sustained relief for inflation and borrowing costs
25 September 2026: Brexit and Trump’s tariffs push UK’s food and drink trade deficit to £21bn
– The UK’s food and drink trade deficit reached £21.1bn in the first half of 2026, its largest since 2000. Export volumes fell 11.7% to 4bn kg, while imports remained close to record levels
– Brexit-related border checks and trading complexity continued to weigh on European sales, with exports to the EU declining 0.9% in value. Shipments to Ireland and France fell 4.9% and 4.6%, respectively, during the period
– US tariffs added further pressure, with UK food and drink exports to America falling 16.5% after the introduction of a 10% tariff. Middle Eastern disruption also contributed, with exports to the UAE falling 23.4% amid the Iran conflict
– The widening deficit has intensified calls for measures supporting domestic producers, including simpler regulation and improved UK-EU trading arrangements. Industry groups argue that rising energy, labour and compliance costs are weakening competitiveness and discouraging investment in domestic production
25 September 2026: UK regulatory crackdown closes CFD firms with overseas links
– The FCA said 21 firms offering contracts for difference have closed since 2025, while three others are cancelling their regulatory permissions and two face investigations, following action against firms allegedly misusing UK authorisation
– The crackdown targets firms conducting limited UK business while using FCA authorisation to lend credibility to linked overseas entities. The FCA said this can create misleading impressions that customers receive UK regulatory protections when contracting offshore
– The regulator has imposed trading restrictions, required independent reviews and opened enforcement investigations in the most serious cases. The action builds on its longer-standing restrictions on retail CFD sales and concerns around offshore redirection
– The developments reinforce the FCA’s focus on firms operating across jurisdictions and the importance of clear legal-entity structures. Retail CFD customers dealing through authorised UK firms can access protections including leverage limits, complaint mechanisms and potential compensation
24 September 2026: FTSE holds steady as global bond rout increases rate-hike bets
– The FTSE 100 remained broadly flat as investors digested a sharp global bond sell-off and renewed expectations of higher interest rates. Rising government bond yields increased pressure on equity valuations, although UK markets showed resilience amid mixed sector performance
– Global bond markets came under renewed pressure after stronger-than-expected US business activity and rising input prices fuelled concerns that central banks may need to tighten policy further. The sell-off pushed major sovereign yields towards multi-year highs
– Higher oil prices added to inflation concerns, with Brent crude trading above $103 a barrel after renewed supply risks linked to the Middle East. Persistent energy inflation is increasing expectations that the Bank of England could raise rates later this year
– UK equities therefore face a more challenging rate environment, as higher gilt yields can increase financing costs and reduce the relative appeal of stocks. Investors are increasingly balancing resilient economic activity against renewed inflation and monetary-policy risks
24 September 2026: Bank of England rate setters warn of ‘sparks in the tinderbox’
– Deputy Governors Clare Lombardelli and Sarah Breeden indicated they were moving closer to supporting higher interest rates, after both backed September’s 3.75% hold. Persistent energy costs are increasing concerns that inflation could become embedded in domestic pricing
– Lombardelli warned that businesses could only absorb higher energy costs for so long, with existing hedges eventually expiring and margins coming under pressure. Prolonged energy inflation could therefore increase pass-through into consumer prices and broader services inflation
– The Bank expects inflation to rise from 3.1% in August to around 3.7% in the fourth quarter and 4.2% in early 2027. Policymakers are therefore monitoring whether the energy shock creates second-round effects through wages and price-setting
– Both officials stressed that future decisions will depend on how energy prices evolve and whether inflation becomes persistent. The comments reinforce a more uncertain rate outlook, with policymakers balancing renewed inflation risks against weaker labour-market and demand conditions
24 September 2026: UK banks make first interbank transactions using tokenised deposits
– Britain’s largest banks have completed the first interbank transactions using tokenised deposits, demonstrating that blockchain-based representations of commercial bank money can move between separate institutions. Lloyds, NatWest and Barclays completed two mortgage-related transactions under the industry-led initiative
– HSBC and other participating banks also tested a person-to-person payment simulating an online marketplace purchase. The trials demonstrated programmable settlement, allowing funds to be released automatically when specified conditions are met, potentially reducing processing times and operational friction
– Tokenised deposits retain the legal and regulatory characteristics of conventional commercial bank deposits while adding blockchain functionality. UK Finance says the technology could support faster, more efficient payments while preserving the trust and protections associated with regulated bank money
– The milestone strengthens the UK’s broader push towards financial-market tokenisation, with the Bank of England and FCA seeking to establish infrastructure and regulatory frameworks for digital assets. Future applications could include tokenised securities settlement and digital-asset transactions
24 September 2026: Burnham under pressure to lobby Trump on US diesel export ban
– UK Prime Minister Andy Burnham is facing pressure to lobby the Trump administration against potential US diesel export restrictions, with America supplying around 31% of UK diesel imports and domestic pump prices approaching the previous record
– Reform UK Treasury spokesperson Robert Jenrick has contacted US Treasury Secretary Scott Bessent, arguing that restricting exports could threaten Britain’s economic and energy security. He also urged Washington to consider exempting the UK if restrictions are introduced
– UK diesel averaged 197.75 pence per litre on September 24, according to the RAC, compared with 142.38 pence before the Iran conflict. Further restrictions could intensify competition for alternative supplies and increase costs for transport, agriculture and industry
– The potential disruption comes as Europe has become increasingly dependent on US diesel cargoes following refinery disruptions across the Middle East and Russia. Although outright shortages are considered unlikely immediately, reduced US exports could push European diesel prices materially higher
24 September 2026: Treasury open to smaller fiscal headroom to reduce UK tax rises
– The Treasury and Downing Street are considering accepting a smaller fiscal buffer at October’s Budget, potentially reducing the need for tax increases or spending cuts as higher borrowing costs and inflation weaken the government’s finances
– The OBR’s March forecast put fiscal headroom at £23.6bn, but recent increases in gilt yields and borrowing have substantially reduced that cushion. Investors surveyed by the FT indicated around £14bn could remain manageable without triggering significant market disruption
– The debate highlights the trade-off between maintaining a sizeable safety margin and limiting additional tax burdens. Healey faces pressure to finance public services, defence and investment while preserving market confidence and demonstrating adherence to the government’s fiscal rules
– Investor views remain divided over how much headroom would be credible, with some arguing that dropping below £20bn could weaken confidence. Final decisions are expected alongside the OBR’s October forecast, which will determine the government’s updated fiscal position
24 September 2026: MPs to consider whether Bank of England’s remit is ‘fit for purpose’
– The Treasury Committee has launched an inquiry into whether the Bank of England’s monetary-policy independence remains appropriate 30 years after it was granted operational independence. MPs will examine whether the framework continues to meet the needs of the UK economy
– The review comes as the UK faces higher public debt, prolonged inflation above target and a greater role for quantitative easing and tightening. MPs will assess whether these structural changes have altered the case for an independent central bank
– The inquiry will examine the effectiveness of the Monetary Policy Committee’s remit, including price stability, inflation expectations and economic wellbeing. It will also consider whether the Bank, government and Debt Management Office coordinate effectively on monetary policy and debt management
– The review also reflects wider international debate about central-bank independence and accountability. MPs will consider whether existing safeguards remain robust, while examining how appointments, communications, QE and QT have affected confidence in the UK’s monetary-policy framework
24 September 2026: Rate rise ‘increasingly likely’ if energy price shock persists, says BoE official
– Bank of England Deputy Governor Clare Lombardelli said monetary policy is increasingly likely to need tightening if elevated energy prices persist, unless there is clear evidence of weaker economic activity or renewed disinflation
– Lombardelli noted that businesses have so far absorbed much of the increase in energy costs, partly through existing hedges and narrower margins. However, she warned companies have limited capacity to continue absorbing higher costs indefinitely
– The Bank’s latest forecast expects UK CPI inflation to rise from 3.1% in August to around 3.7% in the fourth quarter and 4.2% in the first quarter of 2027, reflecting the continued impact of elevated energy prices
– Lombardelli stressed that rates would not respond mechanically to energy prices, with policymakers assessing how shocks affect wages, inflation expectations and business pricing. Bank Rate currently stands at 3.75%, following September’s 6-3 MPC decision to hold
23 September 2026: UK business activity cools as inflation pressure ramps up, PMI shows
– UK private-sector activity slowed in September, with the composite PMI falling to 51.7 from 52.5 in August. The reading remained above 50, signalling expansion, but indicated quarterly economic growth of only around 0.1%
– Services activity weakened to a three-month low, while companies reported accelerating input costs as higher energy and fuel prices fed through. Prices charged by services firms increased at their fastest pace in four months, highlighting renewed inflationary pressure
– Manufacturing provided some support, with its PMI rising to 52.0 from 51.7, helped by stronger domestic orders and improving optimism. However, employment continued to decline as elevated costs, subdued demand and uncertainty discouraged businesses from hiring
– The combination of weaker growth and rising prices creates a difficult backdrop for the October Budget and monetary policy. Markets were pricing around a 60% chance of a Bank Rate increase on November 5, highlighting the competing pressures facing policymakers
23 September 2026: Global banks threaten to shift investment away from UK if taxes rise
– International banks have warned that further UK tax increases could prompt them to reconsider investment and employment plans, adding pressure on Chancellor John Healey as he seeks additional revenue ahead of the October Budget
– UK Finance said the effective tax rate for a model corporate and investment bank is already 46.5% in London, compared with 42.2% in Amsterdam, 39.1% in Frankfurt and 29% in Dublin, highlighting competitiveness concerns
– Bank executives identified higher taxation and tighter immigration rules as factors that could encourage firms to review their UK operations. The concerns come as international banks increasingly use multi-hub strategies to distribute activities across financial centres
– The debate comes as the government faces higher borrowing costs and seeks additional Budget revenues. Industry representatives argue that maintaining tax certainty could support investment, while unions have argued that profitable banks have capacity to contribute more
23 September 2026: Healey’s options for raising taxes in the Budget
– Chancellor John Healey faces limited room to raise revenue ahead of the October Budget, after Labour’s manifesto commitments ruled out increases to income tax, VAT and National Insurance rates. The government therefore faces difficult choices over alternative tax measures
– Potential options include changes to capital gains tax, inheritance tax, property taxation and reliefs, alongside measures targeting pensions and savings. Each could raise revenue but carries different implications for households, investment decisions, business activity and the wider economy
– The fiscal challenge has intensified after August borrowing reached £18.3bn, £3.5bn above the Office for Budget Responsibility’s forecast. Higher borrowing and debt-servicing costs have reduced the government’s flexibility, increasing pressure to identify credible revenue measures
– Any tax increases would need to balance revenue generation with Labour’s broader growth ambitions. With businesses already facing elevated employment and operating costs, the Budget will involve trade-offs between strengthening public finances, protecting investment and limiting additional pressure on economic activity
22 September 2026: How Andy Burnham’s ‘Buy British’ push could backfire
– Prime Minister Andy Burnham’s procurement drive aims to redirect more of the UK government’s £400bn annual purchasing towards domestic businesses, using public contracts to support British jobs, skills and industrial capacity across sectors
– Legal constraints could limit the policy’s scope, as World Trade Organization rules generally require qualifying foreign suppliers to receive equal treatment in public procurement, subject to specific exemptions. This could create challenges for aggressively favouring British companies
– The practical scope for increasing domestic sourcing may also be narrower than the rhetoric suggests. A 2019 EU study found that 84% of UK public procurement was already sourced domestically, potentially limiting additional economic gains from localisation
– Economists and industry groups have highlighted implementation risks, including reduced competition, higher costs and weaker bidder participation. The government plans to increase job-creation weighting in major contracts, with reforms covering approximately £90bn of procurement
22 September 2026: Burnham to press EU chief to let UK participate in ‘Made in Europe’ policy
– Prime Minister Andy Burnham was due to urge European Commission President Ursula von der Leyen to include Britain in the EU’s proposed “Made in Europe” industrial policy, warning exclusion could create collateral damage for UK businesses and supply chains
– The Industrial Accelerator Act is designed to prioritise European manufacturers in public procurement and subsidies, particularly across strategic industries such as electric vehicles, batteries, steel and clean technologies, as Brussels seeks to reduce dependence on Chinese suppliers
– UK automotive manufacturers are particularly exposed, with the Society of Motor Manufacturers and Traders highlighting an €80bn annual UK-EU automotive trading relationship and deeply integrated cross-Channel supply chains. Exclusion could affect procurement access, incentives and competitiveness for British-built vehicles
– London is seeking “trusted partner” status rather than full EU membership, but member states remain divided over eligibility. France favours tighter restrictions, while Germany and some Nordic countries have shown greater openness to including close trading partners such as Britain
22 September 2026: UK borrowing overshoot darkens backdrop for Healey’s Budget
– UK government borrowing reached £18.3bn in August, £3.5bn above the OBR forecast and £2.9bn higher than a year earlier. The overshoot adds pressure on Chancellor John Healey as he prepares his first Budget on 28 October
– Borrowing for the financial year to August reached £77.3bn, £8.1bn above the OBR’s forecast. Higher government spending, particularly on benefits, public services and debt interest, has outweighed stronger tax receipts during the period
– Debt-interest costs reached £8.8bn in August, the highest August figure since comparable records began in 1997. Rising gilt yields and inflation-linked payments are increasing financing costs, reducing the government’s available fiscal headroom ahead of the Budget
– The deterioration comes as the government seeks to meet its fiscal rules while funding investment, defence and public services. With borrowing costs elevated, Healey faces tighter choices over taxation and spending, while markets will scrutinise the Budget’s credibility closely
UK Financial Services Key Transactions
25 September 2026: OneClickComply bags £1m to automate cyber compliance
– UK cybersecurity platform OneClickComply has raised £1m from Mercia Ventures and Northstar Ventures, taking total funding above £2.4m. The capital will support platform development, sales and customer success, while the company plans four new North East hires. Its technology automates up to 90% of compliance work
24 September 2026: Outerlimit raises $16m as agentic AI outpaces security
– London-based Outerlimit has emerged from stealth with $16m (£12m) in pre-seed funding from AlbionVC, Evolution Equity Partners and Crane Venture Partners. The company is developing decentralised security infrastructure that applies Zero Trust controls at the individual AI-agent action level, addressing growing enterprise security risks
24 September 2026: Corient joins race to buy W1M
– US wealth manager Corient has joined the potential bidders for W1M, alongside fellow US group Cerity Partners and several private equity firms. W1M, majority-owned by Lovell Minnick Partners, oversees around £30bn, highlighting continued international and PE appetite for scaled UK wealth platforms
24 September 2026: Pollen Street explores strategic options amid potential sale
– London-listed Pollen Street is exploring strategic options, including a potential take-private transaction, and has begun preliminary discussions with a limited number of parties. The private capital firm manages £8.4bn across private equity and private credit, highlighting continued consolidation among mid-sized alternative asset managers
22 September 2026: Schroders’ sale to Nuveen set to complete next week
– Schroders’ £9.9bn acquisition by Nuveen is expected to complete on 1 October, subject to a 29 September court hearing. The transaction will create a combined asset manager overseeing nearly £1.9tn, while Leonie Schroder will remain on the board following completion
22 September 2026: PE giants close to striking £1bn deal for Canaccord Wealth
– Warburg Pincus and Clayton Dubilier & Rice are reportedly in advanced discussions over a joint acquisition of Canaccord Wealth, which manages around £40bn. The potential £1bn-plus transaction follows an auction process and would further highlight private equity’s appetite for scaled UK wealth management platforms
22 September 2026: Toscafund backs CellPoint’s Zenith with £25m investment
– CellPoint has secured £25m from Toscafund to launch Zenith, an AI decisioning platform designed to optimise payment performance for airlines and hospitality businesses. The investment will support product development and 50 new roles across AI, data, sales and partnerships in Europe, the Americas and Asia
A Word from Our Founder & Managing Director
An 85% probability of a November rate hike, borrowing £3.5bn above forecast and a Budget now less than four weeks away, the pressure on the macroeconomic and fiscal outlook is intensifying. Yet wealth management consolidation, landmark asset management transactions and continued technology investment all point to a sector that is actively positioning rather than waiting. At HSA Advisory, we help clients do exactly that by bringing senior-led insight to M&A, cross-border growth and capital raising where the ability to move with conviction ahead of a defining moment is the clearest source of competitive advantage. Four weeks to the Budget. The window to act is narrowing.
Himanshu Singh, Founder & Managing DirectorNew Podcast: M&A Station by Himanshu Singh
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Pulse Check
Renewed energy inflation is reshaping rate expectations, while strong financial-services M&A highlights continued investor appetite for quality UK platforms.
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Source: Financial Times, Reuters, The Times, Insurance Times, Insurance Business UK, The Guardian, Insurance Age, CityWire, FinTech Global.
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