UK Macroeconomics & Monetary Policy
- Bank Rate Held at 3.75%: The Bank of England’s Monetary Policy Committee voted to maintain the base rate at 3.75%. Despite global energy volatility, central bankers opted to hold steady rather than join international peers in raising rates.
- Inflation Rebounds to 3.1%: Official ONS figures showed CPI inflation accelerated to a five-month high of 3.1% year-on-year in August (up from 2.9% in July). The uptick was driven primarily by climbing transport costs and renewed global energy price pressures.
- Core Price Pressures Flat: Underlying price pressures showed relative stability, with core inflation (excluding food and energy) holding at 2.6% for a fourth consecutive month and services inflation steady at 3.4%.
- July GDP Outperforms: The UK economy expanded by 0.4% in July, beating forecaster expectations and showing initial third-quarter resilience despite tight credit conditions.
SME Environment & Labour Market
- Enterprise Growth on Hold: A stark report by Enterprise Nation highlighted severe cash flow pressures across UK small and medium enterprises. Squeezed by high VAT, wage inflation, employer National Insurance, and overheads, 69% of surveyed firms—and 77% of high-street businesses—have delayed or cancelled expansion plans.
- Manufacturing Hiring Freeze: Manufacturing trade body Make UK reported a sharp contraction in hiring intentions. Only 3% of manufacturers plan to increase headcount in Q3, down from 15% in Q2, as firms freeze recruitment ahead of upcoming autumn policy decisions.
- Late Payment Drag: Cash-flow bottlenecks intensified across supply chains, with late payments stripping an estimated £26 billion in liquidity from smaller businesses.
Corporate, Energy & Trade
- Geopolitical Energy Risks: Brent crude’s move above $107 per barrel alongside spiking European natural gas prices has forced retail and manufacturing groups to brace for rising energy bills into Q4.
- Supply Chain Warnings: Shipping friction in key maritime routes continues to impact trade flows, sparking fresh warnings over incoming freight rate hikes and broader import cost inflation.
- Business Investment Weakness: The British Chambers of Commerce updated its forecast, projecting a 0.2% contraction in total UK business investment for 2026, citing elevated borrowing costs and caution ahead of the late-October Budget.
