The combined impact of rising costs, regulatory complexity and global instability, alongside longer-term concerns around talent, technology and investment, are bearing down on businesses in all sectors.

Business confidence remains low

Confidence remains fragile. “We’re being squeezed on revenue, squeezed on cost and consumer sentiment is not there either”, was the view of a member working in the hospitality sector.

Rising wage costs, particularly increases to the National Minimum Wage, continue to erode margins, with limited scope to pass these on. One construction business in the North West reported being “hit hard by wage increases and red tape”, leading to caution on headcount and investment.

Some members highlighted declining UK competitiveness as a result of “recent tax rises and higher operating costs driving investment towards the US and parts of the EU”.

Geopolitical tensions, particularly conflict in the Middle East, are adding further uncertainty and raising worries over increasing energy costs.

Farming: tax and cashflow causing headaches

The farming sector is facing ongoing cost pressures alongside increased tax complexity. Members reported heightened activity around inheritance tax planning, with some decisions made ahead of more recent policy changes to thresholds now difficult to reverse.

Cashflow remains a key concern. A practice member who advises the sector in the East Midlands noted that “prices continue to disappoint given what’s happening with input costs”, while others highlighted rising costs and challenging weather conditions.

There is also evidence of more cautious behaviour. A member in the South West noted that some clients were “not investing in plant and machinery due to cash constraints”.

At the same time, there were pockets of resilience. An East Midlands practice member observed that an agricultural machinery dealer was “surprisingly doing well”, suggesting selective strength within the sector.

Manufacturing: tariffs a challenge

Manufacturing conditions remain mixed. Several members described activity as subdued. A South West manufacturer noted that “customers expect us to benchmark our prices to importers, but we can only compete if we make no margin”.

Export performance is uneven, although some firms report stronger sales in the EU and US. However, global uncertainty continues to weigh on decision-making. A portfolio finance director working with manufacturers in the East of England commented that “we can’t react quickly enough” in relation to policy swings on US tariffs.

There are signs of investment in efficiency, with some firms prioritising automation and expenditure on capital equipment to offset rising labour costs. However, high upfront costs with uncertain payback periods are having a limiting effect.

Concerns were also raised around UK industrial policy. A Midlands-based manufacturing adviser warned that “policy decisions need to reflect the transition period” to avoid loss of domestic capability, particularly in areas such as steel.

Retail: working capital is a key focus

While some businesses reported strong trading at the end of 2025 and in early 2026, this has frequently been driven by promotional activity rather than growth in underlying demand.

Cashflow remains tight in the retail sector, with a growing focus on productivity and working capital. A South West retailer reported a “drop in average transaction value”, with customers “buying as much but spending less”.

Structural shifts continue to reshape the sector. Growth in resale platforms is affecting traditional retail, while some businesses are exploring international expansion, particularly in the US.

There are also signs of strain on the high street. A member based in the South West reported seeing “three local, founder-led coffee shops shut in January as it’s not worth continuing”, reflecting ongoing pressure on smaller operators.

Cost reduction programmes are widespread. A Midlands adviser working with retail clients noted that some businesses have become “too lean” after cutting headcount in anticipation of AI-driven efficiencies.

Travel and hospitality: a better terrible

While there are signs of increased transaction activity in the sector, geopolitical tensions have weakened confidence. A London-based hotel adviser described January 2026 as “a better terrible than last year’s terrible”, highlighting the fragile recovery in the sector.

The impact of conflict in the Middle East is a key concern. A member working in the sporting sector in the North East warned of a “very significant” potential impact on major global events such as the World Cup and Formula 1.

Consumer behaviour is also shifting. A London-based private equity investor in hospitality noted the need to “give customers a good reason to come in and spend”, reflecting increased price sensitivity.

Cost pressures remain significant. A UK holiday park operator described Employers’ national insurance and National Minimum Wage increases as “horrific” for 2025 results.

Tax and regulation remain complex

Tax and regulatory complexity are increasingly shaping business decisions. A London-based member working with the manufacturing sector emphasised that “tax should be the consequence of the business decision not the driver”.

There were calls for more competitive tax policy. A North West practitioner suggested that aligning corporation tax more closely with the Republic of Ireland could be “the simplest and most practical lever” to stimulate growth.

Others stressed that tax alone is not sufficient. A business member in the Republic of Ireland noted that “success also depends on heavy investment in infrastructure and access to talent”.

Some members also expressed concern that recent fiscal announcements did not fully reflect global developments. A small practice member in the UK observed that they were already ‘out of date’ given the impact of the Middle East conflict.

Data and tech: AI worries remain

AI adoption is accelerating but worries abound. A mid-tier practice in the East Midlands highlighted the risk that “it is becoming harder to assess whether junior staff genuinely understand their work due to reliance on AI tools”.

There are also concerns about transparency. A North West practice member pointed to “AI’s inability to show its reasoning”, reinforcing the continued importance of human oversight.

While businesses are experimenting with AI to improve efficiency, uncertainty remains around the return on investment. Members also highlighted the potential impact on entry-level roles and how future professionals will be trained as routine tasks are automated.

Cautious approach to hiring

Concerns about talent pipelines persist. A portfolio member working in manufacturing in the East of England described the current environment in the graduate job market as “horrendous”.

There are also concerns about access to early work opportunities. A UK manufacturer observed that “Saturday jobs are no longer available”, limiting routes into employment.

Some employers are increasing their focus on school leavers, citing stronger work ethic and commitment. A member based in the North West noted that agile working is leading to a “lack of visibility and reduced ambition”.

Employment law changes are also influencing hiring decisions. An international clothing retailer reported being “more cautious when it comes to hiring”, with a growing reliance on offshoring to manage rising costs.