Across sectors, members describe adaptation rather than expansion, with a focus on protecting cash flow, investing selectively and reassessing workforce plans.

Costs are high, confidence is low

Confidence remains fragile and geographically uneven, but several members reported stronger trading overseas than in the UK. A manufacturer in Scotland noted that 2025 had “a strong finish”, with “tentative growth in the Far East and solid US sales”. Although tariffs remain “a huge challenge, so far customers have absorbed the hit, but this will only last for so long”.

Elsewhere, however, margins are tightening. A fast-moving consumer goods (FMCG) business in London reported that any revenue growth reflects inflationary price increases, with “volume tough to come by due to confidence and cost-of-living pressures”. In healthcare, increased staffing costs are proving difficult to pass on, particularly where commissioning structures are changing.

Energy costs and business rates continue to weigh heavily. A manufacturer in the South West cited a huge increase in the cost of energy, while healthcare providers warned that “there’s no point making a loss year on year” where rent and rates combine to undermine viability.

Cash preservation is a consistent theme. A telecommunications business described “cost cutting to protect cash flow”, noting that “costs are increasing everywhere, so there is a lack of cash to invest”.

However, there are signs of resilience. A hospitality operator in the South West reported bookings for 2026 running 10% ahead of last year, with 60% of revenue already secured.

Construction and real estate are flat, with some hope on the horizon

The construction and real estate sectors remain subdued. Members report low transaction volumes and limited price movement. A London-based member working in real estate described the market as “more positive”, but raised concern that “we could run out of steam ahead of the next budget”.

Energy-related infrastructure demand is stronger. An infrastructure adviser in London reported “demand continuing at pace with a significant proportion of energy-related investment driven by the adoption of AI”.

Policy developments are being closely monitored. Members questioned whether the Warm Homes Plan and retrofit funding could lift confidence later in the year, while others expressed hope that pension reform could unlock further investment in the second half of 2026.

Business rates are still a problem

Pharmacies are reportedly withdrawing from GP practices where business rates linked to rental values render operations unsustainable, creating tensions between landlords and tenants.

Hospitality operators highlighted the burden of revaluations and appeals. One member described a successful challenge resulting in a significant refund as “costly and time-consuming”. Concerns were also raised about the impact of the proposed visitor levy.

Last year, HM Treasury issued a call for evidence on business rates, seeking input on the impacts on investment and options to address barriers. ICAEW’s Tax Faculty incorporated member views in their consultation response. 

Sustainability issues impact business

Members across the UK reported operational disruption caused by adverse weather, including flooding and high winds, affecting capital projects and transport services.

Hospitality operators also flagged the financial and technical barriers to installing electric vehicle charging infrastructure at tourism sites, citing grid limitations and high upfront costs.

ICAEW will be hosting another in-person event at Chartered Accountants’ Hall to explore how sustainability is shaping the UK business landscape and influencing resilience, competitiveness and access to capital. Sustainability for Business 2026 takes place on 11 May and is now available to book.

AI disrupts, for good and ill

AI adoption is accelerating across sectors and bringing with it some friction. A Midlands practice firm, for example, had a client refuse to pay for advice after he consulted ChatGPT and received what he considered to be the same answer.

Elsewhere, businesses are ploughing ahead with AI initiatives spanning multiple departments, aimed at improving efficiency and performance. An advertising and media business in London observed that the sector is being “continually interrupted by AI”. Changing consumer behaviour and reduced headcount is being offset by increased reliance on technology.

In audit, one member reported plans for AI to undertake up to 70% of testing, increasing reliance on internal controls. While some see potential for improved sample selection when AI is properly programmed, others noted the need for caution.

Members also expressed frustration at software pricing changes and complex licensing structures that are difficult to explain to clients.

The talent pipeline is drying up

The removal of Level 7 apprenticeship funding has had a marked impact. A Midlands practice said it has had a big impact on the firm and will affect future recruitment. An education provider reported a surge in enrolments “to beat the guillotine”, anticipating a likely switch to employers being more selective in who can move on to Level 7.

Concerns persist around the longer-term talent pipeline. Members reflected that AI may reduce entry-level roles and disrupt traditional career paths, requiring new hires to develop advanced skills more quickly, potentially altering expectations for progression and job satisfaction. 

Labour supply challenges are an issue for engineering and digital roles. Conversely, a member in the healthcare sector reported improved talent availability due to competitor redundancies.

The Employment Rights Act is fuelling caution. A hospitality member warned that requirements for fixed hours could increase staffing costs by 10-15% for seasonal businesses, threatening viability where demand fluctuates. Another member noted growing hesitancy to hire, observing an increased appetite for offshoring.