Host
- Philippa Lamb
Guests
- Frances Haque, Chief Economist, Santander
- David Williamson, Chief Political Commentator, The Express
- Iain Wright, Chief Policy and Communications Officer, ICAEW
Producer
- Natalie Chisholm
Transcript
Philippa Lamb: Happy New Year! Welcome back to Accountancy Insights. Today, it's our annual look ahead for the year. What might 2026 have in store for us? Joining me for a spot of future gazing. I am delighted to welcome our regular team of experts, David Williamson, Chief Political commentator at the Express, Iain Wright, ICAEW, Chief Policy and Communications Officer and joining us remotely this time, Frances Haque, Chief Economist at Santander. Hello, everyone.
PL: We are recording this the week before Christmas, though, I've got to say some of us are already on holiday. Frances, where are you?
Frances Haque: I'm up in, well, wet Yorkshire. I wish it was sunny.
PL: Okay, actually, it may be that we're better off still at our desks (laughs). Shall we start with a quick look back at 2025, I'm going to ask you all to sum it up, and I'm only going to give you one word to do it.
David Williamson: I think grind might be the word. It's been a year where it's been a waiting game. We've been waiting for a budget for what felt like an eternity, and so many of the massive foreign policy issues fair unresolved, and then so many of the things that we're meant to be pinning our hopes on for the economy. No sign of any breakthrough. So it's been this white knuckle ride for a lot of people.
PL: It feels that way to me, too. Iain, what's your word for 2025?
Iain Wright: Can I cheat? I can't think of one word. I certainly can't think of ‘grind’. I'd have four words: more of the same. And it's very much a variation on David's theme, which is, you know, we've still got small growth bumping along the bottom. We've still got foreign policy problems. We've still got a lack of business investment. Inflation's still high, you know, so we're starting 2026 very much how we started 2025.
PL: It feels like that. Francis, I listened back to last year's episode, and honestly it is... I was looking at the issues we were talking about then, and much of it's the same, what would your word be for the year?
FH: Well, I did like grind, but I think it'd have to be mediocre.
PL: That's about as good as it can get, isn't it?
FH: Yeah, awful, isn't it?
PL: I know. Have we got any notable highs we can pull out for the year? Come on. There must be something?
IW: Let's think about some of the things. So industrial strategy, we've got the first industrial strategy, arguably, for a decade. There are eight growth sectors. Those are the right sectors in which the UK economy is going to thrive in the 2020s, and 30s, professional and business services, accountancy is one of them. You know, if delivered and implemented, and that, if's doing a lot of heavy lifting there - that's a really good, positive policy step. But also some of the free trade agreements with India, that's going to boost GDP, the US, we don't talk about this, which is really odd, which is the first agreement that the US administration wanted to sign was with us, and it's going to help things like our automotive industry, our pharmaceuticals, our steel industry. You know, this is good stuff, so I would concentrate on those. And then the UK is still the place to attract venture capital for scale ups, we attract more venture capital than the three biggest countries in Europe combined, next France, Germany and Switzerland. Last quarter, it was $17.3 billion so we're still good. No, let's not talk about grind and mediocre. We are a brilliant nation.
PL: He is starting here with a bang. Any other notable highest notes from you, two?
FH: I was having a look at things like the Entrepreneur Awards, and there are so many success stories. I mean, coming back to this point about venture capital and things like that, actually, one of them is GymShark, which started off very small, difficult to get the, you know, the money they needed to grow. But now look at them. So, you know, there are businesses out there that are making it work.
PL: Actually, it's interesting you raise that, because a year ago, we talked about that difficulty the UK has had for so long that we are great at having ideas and bad at implementing them. So yeah, that is a positive, isn't it? Go on David, you must have one.
DW: Well, it's interesting that amongst even the most vociferous critics of the government, what they often say is that they want the government to actually double down on planning reform. And there is that great shaft of hope that finally, perhaps things have now got to such a crisis where all the bets are being put on house building that actually the system could be unblocked in a way that it hasn't been for decades. So there's a flash of hope there.
PL: Before we start getting into the year ahead. I'm thinking this is the perfect moment for a bit of a performance review. As I said, I listened back to last year's episode. I think you might take a look at some of the predictions you all gave. Actually, you did pretty well, I've got to say, because, I mean, Iain, you talked a lot about Trump and the tariffs then, and the whole kind of, you know, how that was going to go well for us. And it did, didn't it? I mean, up to a point it did, could have gone a lot worse.
IW: It could have, I mean, I suppose that could be the story of 2025. It could have been a lot worse, where the economic growth took place in 2025 was largely a result, it seems now, of companies bringing forward spend, boosting their inventories in anticipation of the tariffs, and then we've had a relatively flat, if not declining, second half of 2025. But I think I must have said last year, I believe in this passionately free trade, trying to eradicate any barriers. That's always good for trade. It's always good for prosperity. It's always good for living standards. And I still believe that.
PL: David, you talked a lot about reform, and of course, you were right. You said it was going to be the big story of the year, and it has been.
DW: It has, it has. And the interesting thing is that they've been able to very much sustain their position in the polls, and there have been regular bouts of people saying, 'Oh, the bubble is going to burst' and such things. But there actually now seems to be a very solid 31% demographic. And beyond that, when the question is broadened, would you consider voting for them? That gets even wider. So you're looking at a sort of 36% and as the last election showed, you only need, in our bizarre democracy at the moment, to be on sort of 34%, 35% and you can end up with a landslide.
PL: Frances, I've got to say you were spot on with your economic predictions: inflation, base rate... you nailed it all.
FH: Fantastic. I definitely want that recorded (laughs).
PL: Yeah, I promise we won't cut that out. No, you really were. So actually, I'm going to hit you with: what about 2026, Frances? The economy – what's going to happen?
FH: I suspect we're going to get a little bit more of the same. But I mean, let's not be negative about this. The fact that we've been through so many shocks, households are obviously trying to recover from all of those, and particularly inflation, which is quite a new shock, I think, to a lot of people. And we know from previous history in the 70s that that can have a real impact on how people behave. So, you know, taking that into consideration, I do actually think that the economy has managed to cope very well. And I think, 2026 we will see more of this. I mean, hopefully productivity might recover a little bit more, and we're not obviously going to go back to pre 2008 levels without an awful lot of more hard work. But I think growth could come, households might start to feel a bit more comfortable with inflation coming down, with interest rates being cut further, obviously, will help housing costs and things like that. So I suspect, as I say, from a growth perspective, a little bit more of the same. But hopefully, you know, we might be able to get around some of these shocks that have really caused problems for households.
PL: It's a bit of a complex picture at the moment, isn't it? We're just waiting on a bank of England Monetary Policy Committee decision later this week on base rate. I mean, I think most people are expecting a cut. Well, obviously, by the time we air this podcast, we'll know. But inflation's sticky, isn't it?
FH: Yes, it is. That's the problem. It's very difficult to understand how inflation is going to really come down, unless wage growth starts to fall more markedly, and then you have things like, obviously the minimum wage going up in April, and we know that that might cause a bit more of an inflation in 2026. Yeah, the wage growth one is the real question, I think.
PL: And it's hitting the job market, isn't it? I mean, what do we think about the job market in 2026? We are already seeing problems there, as Frances says. We've got wage inflation, but at the start of the job market, the entry level, that's very tough right now. So where do we see that going?
IW: I think it is tough. I think the idea of, you know, graduates, apprentices, internships, they're being cut. And that's a combination of low growth in the economy, therefore cost cutting, trying to manage their costs, and then, let's be honest, some degree of AI taking entry level jobs as well. Not always, and that's, I think, over egged in terms of some of the coverage. It's more about, there's no growth in the economy.
PL: It's wait and see, isn't it? By business?
IW: Yeah, but that worry about, you know, how do I get that first rung on the ladder when it comes to a career? That's really challenging.
DW: Yes and unemployment is becoming part of the narrative in a way it hasn't been for a very long time. And you can see that that's being fielded just on a week by week basis, and things like Prime Minister's questions. And once that seeps in the notion that jobs are in danger, that has such an effect on confidence. And I think that's where the biggest killer is, because if people are starting to actively worry about their jobs, they're worried about whether their children are going to get their first job, and they're also feeling insecure in their employment themselves. And that's not what you need at this moment where you're trying to do everything possible to pump pride the economy. If people are suddenly thinking, I can't afford that extra luxury.
PL: Yeah, and it's that danger of disengagement, isn't it? By younger workers, because they paid for their education, they paid for their degrees, and suddenly no one wants them.
IW: The number of NEETS – young people not in employment, education or training – is higher than it's been for about two decades. This is a real issue, and the Labor government, to its credit, has identified that and is trying to put things in place. But I think you know the idea of youth unemployment, that entry level job market, and how squeezed that is, you know that will be a political and economic issue in 2026.
PL: And it makes you wonder, Frances, doesn't it, about the talent pipeline? Because if these young people are not getting a start, where does the next generation of middle managers, and ultimately, you know, C-suite leaders, where do they come from?
FH: Yes, I mean, it really is a short term strategy. If you're trying to reduce costs by not hiring grads, you're right. And in a world of demographic change, we know that we're obviously going to have a much older population. We need to have younger people come through from an innovation perspective. All of that kind of.... the energy that they bring. I mean, I have to say, just looking at my team, which is actually quite age dispersed, it's great having some... you know, we've got a grad in at the moment, and they bring such energy because they don't have the same cynicism as... (laughs) older people.
PL: Not that we need to suggest that older workers are in any way disenchanted, obviously (laughs). Iain, where are the positives here? Anything regional that we should be thinking is going to pop up this coming year?
IW: We'll get a lot of economic growth, hopefully from cities. Manchester's always cited as the big one in terms of... for the best part of two decades. The way that that's powered ahead, you'd like to see other areas do the same. Devolution, expanded use of mayors, you know, can bring people together, convene, can act as real ambassadors for their areas. And so hopefully, even what you see with the likes of the Andy Burnham's of this world, you'll see in other major cities as well.
PL: I mean that does bring us neatly to politics, doesn't it David? I mean, the government is bottoming out in the opinion polls, isn't it? Where is that going to go?
DW: That's it, because it seems to be. Every month there's a press release from a polling company about how this is the worst ratings ever seen. And when people are asked about the direction of the company, of the country, and you have 71% saying that things are going in the wrong direction. I mean, there is something probably in the British character that people would never go, 'this is a golden age'. Even if there was milk and honey flowing, there'd still be a degree of pessimism and things. But things are, by any standards, pretty atrocious at the moment. And then when it gets to the personal ratings of the Prime Minister and the Chancellor, there is that question of, 'how low can things go?', essentially. And I think a lot of it comes back to, as we were talking about, the election. Where you just had such a tiny percentage of the actual eligible voters voting for a party which has such a landslide that there isn't that sense of buying in, of giving people goodwill that you traditionally get in the 18 months after an election. That disappeared incredibly quickly.
PL: It did, didn't it? It really disappeared fast, because it pretty well disappeared by the time we recorded this last year, amazingly, when they were fresh into power. I'm going to put you on the spot and ask you the question, do you think Keir Starmer will survive this year?
DW: I think it's up to him to an incredible degree. Unlike in the conservatives, there isn't a very neat way of toppling a leader.
PL: Yes, the process is different.
DW: That's right. And that requires a level of organisation, which... you've got a lot of very new MPs together in one place, and certainly at the moment, there isn't the feeling that that's imminent, that people haven't bonded themselves into great tribes in Westminster. You have the people looking back mythically, almost to the Blair / Brown days. But there isn't that level of people belonging to a specific grouping with a clear narrative. Instead, you have flurries of, well, could this person do the job? Which is a totally different thing. But there's also the great feeling of needing to differentiate oneself from the conservatives, and the idea that, really, what got the country fed up was the continuous turn of leaders, the naked plotting. And I think there's a realization that, yes, the economy is very challenging, but we're not in recession. It is an incredible slog, the last thing that we need to do is to tear ourselves apart in front of the country.
PL: Iain, you're a former MP, what do you think? Is the discontent too dissipated for it to turn into anything concrete?
IW: Not for me to tell new MPs what to do, but my, one of my lessons of politics is that governments do well when they're talking to the country. When they're looking inwards, and they see that infighting, the electorate will not forgive them for that. So that sense of... you're just concerned about the corridors of Westminster and keeping your own job. We've just talked about unemployment: don't think about your own job, MP, think about the country's jobs. I think that's what they want.
PL: Frances, I mean, if it came to it, we already got the uncertainty. We've already got the discussion going on and on and on about, will they, won't they? But if there was an election battle, I mean, what would that do to market confidence, do you think?
FH: Yeah, I think the markets would not take kindly to it, let's put it that way. There would be a lot of uncertainty, and that's bound to feed through. I mean, things such as how it would affect a bank rate and how we deal with that is also unknown, because you just don't know what the economics behind it would then do. I mean, I suspect any kind of extra volatility will affect, obviously, investment, and that's going to affect growth, and then, you know, it makes the decision for, say, the MPC members, so the Monetary Policy Committee members, more difficult if you think that the at least political environment is also up in the air.
PL: Yeah, fragile. And we've already had President Trump adding in his opinion of the UK and its government in the last week or so. Do we have any more surprises to expect from him, do you think? Thinking more broadly, what about what else is going on in the world? He seems more focused on South America now than Europe.
DW: He has a great interest in that and whatever's going on with Venezuela. That's going to be one of these stories, probably of 2026, if he continues to have this huge interest, where you have a major oil producing nation that people are openly talking about. Whether the government will be overthrown or whether it will collapse, there's huge potential there. I think that there's lots of confusion in Republican circles as well as to what Trump's foreign policy is. Because I think people, a lot of his Maga base, were looking for somebody who would actually take forward isolationism into the 21st Century, and instead, they see someone who's spending a lot of time and talking a lot about solving crises, ending wars...
PL: Gaza, Ukraine, South America...
DW: Absolutely and so interestingly, if we did turn the clock back just a little while, one of the big worries was that there was going to be a complete retreat from the world. That hasn't happened. It's certainly not a predictable, traditional center right approach. But certainly a lot of people in foreign policy circles say that he seems to have this pattern of creating moments of profound shock, where the status quo seems to be completely offended, and then suddenly we see a resurfacing of a sort of more traditional American foreign policy. And at the end of the day, you do have somebody who is very much focused on what is America's national interest, and that's expressed in a more brutal way than it has been before. But perhaps that's certainly going back to Kissinger days. You know that worship of realism has been something which has been at the very heart of the establishment. It's just a bit more naked now.
PL: And Iain, as we record this, Ukraine talks are teetering. It's hard to say which way that's going to go right now, isn't it? We had been hoping for a bit of a reconstruction win, at least, but obviously we're not there yet.
IW: Well, Phillipa, let me go back to America and these two things... I'm trying to be optimistic. New year, new start, new optimism. These are somewhat intangible, but sometimes the economy works on intangibles: July 2026 marks the 250th anniversary of the Declaration of Independence – the experiment that we've had over the last two and a half centuries of this ideal of a country might lead to something in terms of freedom, what it stands for, and provide some degree of economic optimism. That, and the fact that the World Cup is going to be certainly part of it in America as well.
PL: If anyone can afford to go. I was looking at the ticket prices. Wow.
IW: Can you imagine if England and Scotland have a good run? You know, that gives a bit of optimism. You can just see the notion of... if we've got a nice summer, England and Scotland maybe battling it out in the final of the World Cup. It just does something to the sense of the national mood... they might start spending. You know, as I said, something as intangible as that could have a material impact.
PL: It's true, isn't it Frances? it's often emotion, and particularly for a consumer economy like ours, emotion kind of drives things in a really marked way. And as Iain says, if everyone starts feeling a bit good about football in the summer, it could make a huge difference, couldn't it?
FH: There's something where we need to drive confidence. That's what we need. I mean, both business and consumer. But yeah, something like that, that feel good factor could be that sudden switch point that gets us back to spending, to feeling better about everything, and therefore perhaps not needing to save as much. Because, you know, we think, yes, actually, jobs are safe. Inflation's coming down. You could see, you can write a story on on that.
PL: And it becomes self fulfilling, doesn't it?
FH: Yeah, absolutely.
PL: But the US economy just keeps on going, doesn't it?
FH: Yes, I mean, it's been a remarkable story, given tariffs and things like that. So you've had that on the one hand, whereas you've had AI, obviously, on the other. And maybe some of them counteracting the effects of each other. But certainly, I mean, growth has been stronger than we expected.
PL: I wanted to ask you about AI, actually Frances, because, there's been a lot of talk about investors losing patience, and that it's going to turn out to be a short term bubble... maybe with long term, excellent consequences, but right now, bad news. What do you think? Are we going to see a resolution to that? How patient will investors be?
FH: I think it depends what else is out there as well. But, I mean, I could see the bubble, rather than bursting, maybe slowly deflating, as perhaps other things come up. It's quite hard, because if you think of all the companies within that, you've got the likes of Amazon… I don't think that's a bubble. I mean, they've been doing well for many, many years. But then on the flip side, you're like, Oracle, you know, not doing so well. But Nvidia seemed to push on through on a regular basis. So it's very hard, actually, because that bubble is more than just... it's not quite the same as the digital bubble that we had back in the sort of early 90s.
PL: What do you think Iain, because, as Frances says it's... I mean, AI is embedded in a whole bunch of other industries. It's not isolated in the way that, you know, the last time we had this sort of digital hoo ha, it was ring fenced in a way that this isn't. Where do you see it going? Sometimes it seems like it's the only thing we talk about.
IW: It reminds me, not that I was there, of the 1840s with the railway boom, this general purpose technology. And there is, you know, investors pile in, and there is a bit of a correction. But ultimately, what we had as a result of the 1840s is the most comprehensive transport system the world had ever seen. So you know, that really uplifted productivity and living standards I think will come out of this.
PL: But does that apply to AI? Because I mean, a railway tracks a railway track. But AI tech is very replaceable, isn't it?
IW: Well... and Frances mentioned this, the thing that astonishes me, I was reading recently that five companies... five companies: Amazon, Meta, Microsoft, Alphabet and Oracle, in the last quarter, spent on capital expenditure: $106 billion. I mean, that's the last three months. 1.4% of US GDP. That's more than the Apollo moon mission. I mean, this is astonishing stuff. They're doing it for a reason, and they see prizes. They see big market advantages as a result of that. We've not seen this level of capital investment, ever. You know, even in the industrial revolution, it puts that railway boom into shade. So yeah, I do think there will be a correction, that seems almost inevitable. Some of these valuations just seem... just untenable. But ultimately, I think there's a sense that this general purpose technology will help revolutionise things.
PL: And a lot of that investment, as you say, is actually real estate now, rather than just tech. It's the supportive real estate, isn't it?
IW: What, like data centers and things like that?
PL: Yeah.
IW: Absolutely. And in terms of the energy requirements needed, to help literally fuel those data centers.
PL: And that's different to even a year ago. We weren't really talking about that a year ago, were we, but that's happening now.
DW: It is, and it feeds into the whole narrative in this country about energy costs and the sheer panic that you can sense in a lot of people where, how on earth do you actually grow your economy when you're such an expensive place to turn the lights on in?
PL: Are we still the most expensive economy for business on power? I think we are, aren't we?
IW: Yeah. It's quite a big outlier.
PL: Yeah. So it's a big problem.
DW: It is, especially when you have so much rhetoric about bringing data centers to struggling parts of the UK, and you're like, well, that's a fantastic idea, but if it costs so much to plug it in, how would you sell that?
IW: But that's a source of optimism as well. Let's be optimistic in the new year...
PL: This is a new Iain. We've not seen this Ian before.
IW: It's the new year's resolution (laughs). David mentioned earlier about the planning reforms – if we're at delivery level now, if we're in the execution stage, a generation of small modular reactors, nuclear reactors, and the likes of Rolls Royce helping literally power this... that can have a really positive impact upon this. So nuclear is the base load, combined with some degree of renewables, means that we wean ourselves off foreign sources of fuel. That could help bring energy costs down.
PL: You see that shift in the dial, Frances? You're nodding.
FH: Yeah, it certainly could. I mean, I think energy course is the one thing that would be really helpful if we could, I mean, not just for households, but for businesses too. And the thing is, I think sometimes you need a catalyst. So if things like the data centers can go ahead, we know they need a lot of energy, then maybe that's the catalyst to get the innovation in to drive it forward.
PL: I think that's a good optimistic note to almost wrap this up. But I'm not going to let you all leave without a hard prediction from all of you, actually, for the year, one thing you are pretty clear in your mind is going to happen this year.
DW: Okay, the raw politics is going to be as much of an animal spirit as ever, because we've got the May elections coming up. So you have council elections all across England, but you also have the Scottish Parliament, and you have the Welsh Parliament, you have Reform hoping to make major breakthroughs, potentially taking control of Wales. If that happens, there's a far bigger knock on effect. People are comparing it to the Hartlepool by-election, potentially, and saying that will be the moments where Keir Starmer is going to have to essentially decide, does he stay in at the top of the team? And if the Conservatives are wiped out in the... certainly in the Welsh parliaments as well, similar questions will be asked. So in both the two main traditional parties of power, there's the potential for great gnashing of teeth.
PL: Busier for you.
DW: Well, I quite like the Hartlepool by-election, but I'm thinking about the 2004 one rather than the 2020 one.
IW: Yes I am dating myself (laughs). I don't know if there's anything that we can say is absolutely going to happen, but what I want to do is highlight what Frances said, which is, I think the issue of 2026 will be inflation and whether that can be tackled. So history shows that inflation is sticky. It doesn't come down as fast as it goes up, and that being the case, what does that mean for interest rates? But if inflation, and in particular food inflation, which is eye wateringly expensive, and households are really feeling that at the moment, they've just done a Christmas shop, and thinking 'that was painful', but if that gets under control, you see interest rates coming down... that might be the catalyst where people go, 'feel a bit more confident, I might go get that new car, I might have that building extension' and all of that – that helps really fuel economic growth. It's all about inflation.
DW: Indeed (laughs).
PL: You're dating yourself there!
PL: And then to the stasis. Frances, If there isn't something you know is going to happen, what would you like to happen?
FH: So from my perspective, I would like to see more policies focusing on the younger generation, which I think would then help. I mean, obviously that's going to help. I think people feel more confident and things like that, but I think it is really important that we are focusing on the younger generation. The other thing that I will say is, I think there might be further progress made with the EU. I think that, interestingly, has come up in the last, what, couple of months? The government seems to be pushing that, so it would be helpful, from a trade perspective, in particular for the UK, given that the EU is still our biggest trade partner, if we could see some more progress there too.
PL: Closer ties.
FH: Yeah, sorry, so I've had two.
PL: Two is fine. And in fact, I am gonna say, David, is that gonna happen? Do you think you see that too?
DW: There's going to be ruptions if it does, because we'll be marking in June, the 10th Anniversary of the Brexit vote. And it is the type of issue which does excite the Tory right, still to a credible level. But the interesting thing is that actually one of the people who's made the most profound and eloquent argument of Brexit being a success is actually Keir Starmer, because he was challenged on this recently during Prime Minister's questions. And see, basically it was like someone on a railway track waving a red flag and making the case that it was Jaguar Land Rover in particular. So we have actually been able to get out there and negotiate the best deal with the United States out of everybody. So hang on a moment, customs unions, et cetera. Yes, this gets a certain progressive heartbeat going even faster than normal, but be careful what you wish for.
PL: Time will tell. Thank you everyone, especially Frances, for interrupting her holiday.
FH: Thank you very much indeed.
IW: Thank you.
PL: That is it for this episode. Later this month, on Behind the Numbers, we'll be looking at the C-suite. How do you get there? What are the best routes of entry for ambitious finance and accounting professionals who think they've got what it takes to lead? And talking of self improvement, this podcast is CPD, so be sure to log it on the ICAEW website. Listen through the back catalog of over 100 episodes and subscribe to the series for alerts to all the episodes coming up in 2026. That's two every month from us, and for all you tax professionals out there, an additional tax track podcast every month too. Every single one is eligible to add to your CPD record, so make the most of them. Thanks for being with us.
