Business

Close Brothers has announced plans to cut around 600 job, equivalent to roughly a fifth of its workforce, as the lender accelerates a sweeping cost-cutting programme in response to mounting pressure from the motor finance mis-selling scandal.

The restructuring, confirmed by chief executive Mike Morgan, will reduce headcount to approximately 2,000 over the next 21 months and is intended to restore investor confidence following renewed scrutiny of the group’s potential compensation liabilities. The move comes amid heightened market volatility after short-seller Viceroy Research claimed the lender’s total compensation bill could reach as high as £1.23 billion, far exceeding the company’s current £300 million provision.

Shares in Close Brothers have come under sustained pressure, falling sharply at the start of the week and continuing to slide as investors digested the scale of potential exposure. The lender is widely regarded as one of the most exposed UK financial institutions to the car finance scandal relative to its size, with motor loans accounting for around £2 billion of its £9.5 billion loan book.

The scandal, which first emerged two years ago, centres on the failure of lenders to adequately disclose commission arrangements paid to car dealers for arranging finance. The Financial Conduct Authority is expected to set out its final redress scheme imminently, with earlier estimates suggesting the total industry bill could reach £11 billion.

Morgan defended the bank’s approach to estimating its liabilities, insisting that its £300 million provision reflects a probability-weighted assessment in line with accounting standards and supported by legal and audit advice. However, the refusal to disclose detailed assumptions behind that figure has fuelled scepticism among investors and opened the door for more aggressive external estimates.

The chief executive dismissed Viceroy’s analysis but acknowledged the uncertainty surrounding the final outcome. He said the eventual cost could be “materially higher” or “materially lower” depending on how the regulator structures compensation and how many borrowers come forward with claims.

Against this backdrop, Close Brothers is moving aggressively to reshape its cost base. The group has already divested its Winterflood broking arm and its asset management business, scaled back growth plans and suspended its dividend in an effort to conserve capital. The latest measures will focus on streamlining operations across its core divisions, including retail lending and commercial finance, where the bulk of job losses are expected to fall.

The restructuring will incur an upfront cost of around £25 million but is expected to deliver annual savings of £60 million by the end of 2027. The company said it would centralise shared services, reduce reliance on third-party providers and cut property and operational expenses as part of a broader efficiency drive.

Artificial intelligence is also set to play a growing role in the transformation, with the bank aiming to deploy AI tools “at pace” to reduce costs and improve customer experience. The move reflects a wider trend across the financial services sector, where firms are increasingly turning to automation and digitalisation to offset rising regulatory and operational pressures.

Despite the cost-cutting programme, Close Brothers reported a mixed set of interim results. The group posted a statutory loss of £65.5 million for the six months to January, an improvement on the £102.2 million loss recorded a year earlier. Adjusted operating profit fell to £65.2 million, down from £80.5 million, reflecting ongoing headwinds.

Its core capital ratio improved to 14.3 per cent, comfortably above regulatory requirements, providing some reassurance on balance sheet strength. However, analysts warn that a significantly higher compensation bill could erode that buffer and materially impact shareholder value.

The situation has drawn comparisons with the payment protection insurance (PPI) scandal, which ultimately cost UK banks more than £50 billion, far exceeding initial provisions and leaving investors wary of underestimating liabilities in mis-selling cases.

Morgan insisted that lessons from the PPI episode had informed the bank’s current approach, arguing that regulatory scrutiny and accounting standards are now far more rigorous. Nonetheless, the combination of regulatory uncertainty, investor scepticism and operational restructuring highlights the scale of the challenge facing the lender.

With the FCA’s final ruling imminent and market confidence fragile, Close Brothers is entering a critical period that will determine both the ultimate financial impact of the scandal and the success of its efforts to rebuild credibility with shareholders.

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Close Brothers to cut 600 jobs as motor finance scandal pressures finances

A significant ownership shift has taken place at The Economist Group after Canadian billionaire Stephen Smith agreed to acquire a 26.9 per cent stake from Lynn Forester, Lady de Rothschild, marking the first major change in the publisher’s shareholder structure in more than a decade.

Smith, 74, is purchasing the stake through his family investment vehicle, Smith Financial, in a deal that underscores continued global investor confidence in one of the world’s most influential media brands. While financial terms have not been disclosed, the transaction represents a notable reshaping of the group’s ownership, with the Rothschild family exiting a long-held position.

The move follows the last major ownership change in 2015, when Pearson sold the majority of its 50 per cent holding to the Agnelli family’s investment company, Exor, which today remains the largest shareholder with a 43.4 per cent stake. Smith’s investment now positions him as one of the most significant minority shareholders alongside Exor, reinforcing a shareholder base that blends long-term strategic investors with a commitment to editorial independence.

Founded in 1843, The Economist Group has built its reputation on championing free trade, liberal economics and independent journalism. That editorial positioning has historically shaped its ownership model, with shareholders often selected not only for financial backing but for alignment with the publication’s values and governance principles.

A spokesperson for Smith confirmed that the investment reflects his “full support for The Economist’s longstanding tradition of rigorous editorial independence”, a key consideration in any change of ownership at the publication. Maintaining that independence is central to the group’s structure, with safeguards embedded in its governance to ensure editorial decisions remain insulated from shareholder influence.

Lady de Rothschild’s decision to sell is understood to be part of a broader reorganisation of her family’s investment portfolio. A prominent figure in international finance and philanthropy, she co-founded telecoms business FirstMark Communications and has held senior roles including a position on the board of Estée Lauder. Alongside her late husband, Sir Evelyn de Rothschild, she also built EL Rothschild, a family office with interests spanning private equity, public markets and real estate.

Smith, meanwhile, brings deep experience in financial services and investment. He co-founded First National Financial Corporation in 1988, building it into one of Canada’s largest non-bank mortgage lenders, and stepped down from its board in 2025. His wider portfolio includes chairmanship roles at Peloton Capital Management, proxy advisory firm Glass, Lewis & Co, and Fairstone Bank of Canada, a major consumer lending institution.

Beyond business, Smith is also known for his philanthropic activity, particularly in education, heritage and the arts, areas that align with The Economist Group’s broader intellectual and cultural influence.

The Economist Group confirmed the agreement, noting that completion remains subject to standard closing conditions. The company did not comment on valuation but emphasised continuity in its strategic direction and governance framework.

The transaction comes at a time when premium media brands continue to attract high-net-worth investors seeking exposure to trusted global content platforms with diversified revenue streams, including subscriptions, events and specialist research services.

For The Economist, the arrival of a new cornerstone investor signals stability rather than disruption. With its ownership model designed to prioritise long-term stewardship over short-term returns, the addition of Smith Financial is expected to reinforce the group’s financial resilience while preserving the editorial principles that have defined it for more than 180 years.

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Canadian billionaire Stephen Smith takes 27% stake in economist group

The Office of the Small Business Commissioner (OSBC) has appointed two new advisory board members as it steps up efforts to tackle the UK’s persistent late payment crisis and prepares for potential new regulatory powers.

Abigail Whittaker, Chief of Staff at Funding Circle, and Ryan Shorthouse, Founder and Executive Chair of think tank Bright Blue, will formally join the board in April following a public appointments process. Both bring extensive experience across finance, communications and public policy at a time when the role of the Small Business Commissioner is expected to expand.

The appointments come as the Government considers strengthening the powers of the Commissioner, Emma Jones (pictured), as part of a broader package of reforms outlined in its Small Business Plan. The move reflects mounting concern over the scale of late payments across the UK economy, which are estimated to cost businesses £11 billion annually and contribute to the closure of around 38 firms every day.

Whittaker joins with a strong background in financial services and corporate communications, having held senior roles at Funding Circle, Vanquis Banking Group, Metro Bank and TSB. Her experience is expected to support the OSBC’s increasing focus on digital tools and data-driven approaches to improving payment practices, as well as strengthening engagement with SMEs and lenders.

Shorthouse, meanwhile, brings deep expertise in public policy and economic reform. As founder of Bright Blue and a commissioner at the Commonwealth Scholarship Commission, he has played a prominent role in shaping UK policy debates. His experience across think tanks and advisory bodies is expected to be particularly valuable as the Commissioner navigates potential legislative changes and seeks to influence payment behaviour across large corporates.

The OSBC was established under the Enterprise Act 2016 to address late payments and unfair payment practices in the private sector. Its remit includes supporting small businesses in resolving payment disputes, promoting the Fair Payment Code, and encouraging larger firms to improve supplier payment terms.

Emma Jones said the new appointments would strengthen the organisation’s ability to deliver on its core mission. She described the additions as bringing “deep experience of running businesses, national media and communications expertise, and digital know-how” at a critical juncture for the office.

Both appointees emphasised the economic importance of addressing late payments. Whittaker highlighted the central role small businesses play in the UK economy and the pressures they face, noting that improving payment practices can directly support growth and resilience. Shorthouse, drawing on his own experience of running a business, described late payments as “stressful and crippling” and argued that improving cash flow across the economy is an “underappreciated” driver of productivity and investment.

The advisory board will provide strategic input on the OSBC’s operations, including its dispute resolution services, governance, and initiatives such as the Fair Payment Code. Members are expected to attend quarterly meetings and contribute to broader policy and operational discussions, with appointments set for a three-year term.

The timing of the appointments signals a renewed focus on enforcement and systemic change in payment culture. While the OSBC has historically relied on guidance and voluntary codes, the Government’s recent consultation on enhanced powers suggests a shift towards a more interventionist approach.

For SMEs, which often operate on tight margins and limited cash reserves, faster and more reliable payment cycles remain a critical issue. As policymakers look to unlock growth across the UK economy, improving how quickly money moves between businesses is increasingly being viewed as a foundational reform.

With new expertise on its advisory board and the prospect of expanded powers on the horizon, the Small Business Commissioner is positioning itself at the centre of that agenda.

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Small business commissioner appoints new advisory board members amid push on late payments

A landmark tribunal ruling that public electric vehicle (EV) charging should be subject to a reduced 5% VAT rate rather than the standard 20% has sparked renewed debate over fairness in the UK’s charging infrastructure, with potential implications for millions of drivers.

The decision, issued by a First-tier Tribunal, could bring public charging costs into line with those faced by motorists charging at home, addressing what many in the industry have long argued is a structural inequality in the tax system. Currently, drivers with access to off-street parking benefit from the lower VAT rate on domestic electricity, while those reliant on public charging, often urban residents, pay significantly more.

Justin Whitehouse, Managing Director at Alvarez & Marsal Tax, said the ruling reflects “a win for common sense”, highlighting a disparity that has persisted since EV adoption began to scale.

“To most people, it feels inherently unfair that those with a driveway can charge their vehicles at a reduced VAT rate, while those without off-street parking are left paying the full rate,” he said.

The case has also exposed deeper issues within the UK’s VAT framework, particularly around how electricity is classified depending on where it is consumed. The legislation hinges on the definition of “premises”, distinguishing between residential and commercial supply, a distinction that has proven increasingly difficult to apply in the context of modern EV charging networks.

Whitehouse noted that despite sustained lobbying from the industry, HMRC had not clarified its position, making a legal challenge almost inevitable. “The legislation has always been difficult to apply in practice,” he said, pointing to ambiguity that has left operators and consumers navigating an inconsistent system.

The ruling raises the prospect of refunds for drivers and businesses that may have overpaid VAT on public charging, potentially unlocking significant sums across the sector. However, any immediate impact remains uncertain. As a First-tier Tribunal decision, the ruling does not set a binding precedent and could yet be appealed, prolonging uncertainty for both operators and consumers.

Even if upheld, a key question will be how quickly, and to what extent, any VAT reduction is passed on to drivers. While lower tax rates could reduce charging costs in theory, pricing structures across public networks are influenced by a range of factors, including energy wholesale prices, infrastructure investment and operator margins.

In the short term, the decision is likely to intensify pressure on policymakers to address inconsistencies in EV taxation, particularly as the UK accelerates its transition away from petrol and diesel vehicles. Aligning VAT rates between home and public charging has been a longstanding demand from industry groups, who argue that the current system risks penalising those without access to private driveways — often those in cities where EV adoption is critical to meeting emissions targets.

Over the longer term, the case could act as a catalyst for broader reform of how energy usage is taxed in a decarbonising economy, where traditional distinctions between domestic and commercial consumption are becoming increasingly blurred.

For now, the ruling represents a significant moment in the evolution of the UK’s EV ecosystem, one that highlights both the opportunities and the complexities involved in building a fair, scalable and accessible charging infrastructure for the future.

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Tribunal ruling could cut public EV charging VAT to 5%, raising prospect of cheaper charging

Bentley is to cut 275 jobs as the luxury carmaker grapples with a sharp decline in profits and mounting pressure from a weakening global market, underlining the growing strain even at the very top end of the automotive sector.

The Crewe-based manufacturer confirmed that around 6 per cent of its 4,600-strong workforce will be affected as part of what it described as “organisational efficiency measures”, with roles expected to go across management, agency and non-manufacturing functions. The reductions will now enter a consultation process, with the company stressing it will support affected employees throughout.

The announcement came as Bentley revealed a 42 per cent drop in operating profit to £187 million, down from £322 million the previous year and significantly below its £509 million peak in 2023. The downturn reflects a combination of softer global demand, rising cost pressures and geopolitical uncertainty, all of which are increasingly shaping the outlook for premium automotive brands.

Vehicle sales also slipped, with Bentley delivering 10,131 cars last year, a decline of nearly 5 per cent, driven largely by a contraction in key international markets, particularly China. The slowdown in Chinese demand has become a defining challenge for luxury manufacturers, many of whom have relied heavily on the region for growth over the past decade.

Chief executive Frank-Steffen Walliser acknowledged the scale of the challenge, saying the company was being forced to take “difficult decisions to ensure the long-term competitiveness of the business”. While he emphasised that the cuts were not “panic measures”, he conceded that the operating environment remains volatile, with the possibility of further adjustments if conditions deteriorate.

Bentley sought to contextualise the profit decline, arguing that without external pressures, including increased costs linked to its parent company Volkswagen and the impact of US tariffs, financial performance would have been broadly in line with 2024. Nonetheless, the figures highlight how even high-margin luxury brands are not immune to wider economic headwinds.

The restructuring comes at a pivotal moment for the business as it transitions towards electrification. Bentley is nearing completion of a new assembly line at its Crewe headquarters, which will support production of its first fully electric vehicle, scheduled for launch in early 2027. The investment marks a critical step in its long-term strategy, although the pace and direction of that transition are evolving.

In a notable shift, the company has stepped back from its previous ambition to become an all-electric brand within this decade. Instead, it is pursuing a more “balanced portfolio”, extending the lifespan of internal combustion and hybrid models in response to renewed customer demand and a broader slowdown in the uptake of luxury electric vehicles.

This recalibration mirrors a wider trend across the premium automotive sector. Manufacturers including Lamborghini have also delayed or revised EV-only strategies, reflecting both consumer hesitancy and the practical challenges of delivering high-performance electric models at scale.

Beyond product strategy, Bentley is also navigating an increasingly politicised environment around vehicle size and emissions. Walliser defended the company’s larger models, such as the Bentayga SUV, following criticism from London Mayor Sir Sadiq Khan, who has suggested imposing additional taxes on large vehicles, often labelled “Chelsea tractors”, due to perceived safety risks.

Rejecting those claims, Walliser described the debate as politically driven, arguing that all vehicles must meet strict regulatory standards for pedestrian and cyclist safety regardless of size.

Despite the current pressures, Bentley remains committed to its long-term transformation, positioning electrification, product innovation and operational efficiency as key pillars of its future strategy. However, the latest results and job cuts underscore a more immediate reality: even the most prestigious automotive brands are being forced to adapt quickly in an increasingly uncertain global market.

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Bentley to cut 275 jobs as profits slump amid global headwinds

HM Revenue & Customs has come under fresh criticism over what tax experts describe as a “deeply unfair” imbalance between the interest it charges taxpayers and the rate it pays on refunds, raising wider concerns about trust, transparency and the efficiency of the UK’s tax system.

According to analysis from audit, tax and advisory firm Blick Rothenberg, taxpayers who fall behind on payments are currently charged daily late payment interest at a rate of 7.75 per cent. By contrast, those owed money by HMRC receive interest at just 2.75 per cent on repayments, even when delays stretch over many months.

Tom Goddard, assistant manager at the firm, said the disparity creates a system that appears heavily weighted in favour of the tax authority. He argued that while taxpayers face escalating financial penalties for delays, HMRC itself is not subject to equivalent consequences when repayments are slow.

The imbalance becomes more pronounced when penalties are factored in. Taxpayers who fail to settle liabilities within 12 months can face additional charges of up to 15 per cent of the outstanding amount, alongside further penalties if tax returns are submitted late. In contrast, there is no comparable compensation mechanism when HMRC delays repayments, even in cases where individuals or businesses suffer financial consequences as a result.

Goddard pointed to the real-world impact of these delays, citing cases where taxpayers have waited more than a year for repayments to be processed. In one instance, a client missed a significant investment opportunity after funds earmarked for deployment were tied up in a prolonged HMRC repayment process. Despite repeated attempts to resolve the issue, the delay persisted due to internal administrative complications and a lack of clear ownership within the organisation.

The broader concern, he suggested, is not only the financial disparity but the operational friction involved in resolving disputes. Taxpayers seeking to reclaim funds often face a lengthy and complex process, involving multiple departments and repeated follow-ups. For many, the cost of professional advice required to navigate the system can offset any financial benefit from the repayment itself.

This dynamic risks creating a perception that the system is both inefficient and adversarial. While HMRC attributes delays largely to administrative pressures, critics argue that the burden of those inefficiencies falls disproportionately on taxpayers, particularly at a time when many individuals and businesses are already under financial strain.

The issue also raises questions about HMRC’s broader transformation agenda. One of the stated priorities in its “Transformational Roadmap” is to improve day-to-day performance for individuals and businesses, with a shift towards a more automated, digital-first system intended to handle up to 90 per cent of queries.

While digitalisation is expected to streamline processes and reduce the estimated £20 billion annual cost of tax administration, there is scepticism about whether it will address underlying service challenges. Critics argue that without sufficient investment in expertise and support, automation alone may not resolve delays or improve outcomes for taxpayers.

Trust remains a central theme in the debate. HMRC has identified closing the UK’s £46.8 billion tax gap as a key objective, but advisers suggest that rebuilding confidence in the system is equally important. A more balanced approach to interest rates and compensation, they argue, could encourage greater cooperation and compliance from taxpayers.

There is also a behavioural dimension to consider. If taxpayers perceive the system as inequitable, they may be less inclined to engage proactively with HMRC or prioritise timely compliance. Conversely, a system that treats delays on both sides more evenly could foster a more collaborative relationship between the tax authority and those it serves.

For now, however, the disparity in interest rates remains a point of contention. As scrutiny of HMRC’s performance intensifies, pressure is likely to grow for reforms that address both the financial imbalance and the operational challenges that underpin it.

Without such changes, critics warn, the gap between policy intent and taxpayer experience will continue to widen, undermining confidence in a system that relies on voluntary compliance to function effectively.

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HMRC interest ‘double standards’ branded unfair as taxpayers face higher charges than rebates

Individual insolvencies across England and Wales have surged by 18 per cent year-on-year, in what experts are warning is clear evidence of a deepening household financial crisis as rising borrowing costs, persistent inflation and accumulated debt continue to weigh heavily on consumers.

New data from The Insolvency Service shows that 11,609 people entered insolvency in February 2026, marking a 6 per cent increase on January and a significant jump compared with the same month last year. The figures paint a stark picture of mounting financial strain, particularly among vulnerable households and increasingly, middle-income earners.

The total comprised 768 bankruptcies, 4,210 debt relief orders (DROs) and 6,631 individual voluntary arrangements (IVAs), with DROs reaching their highest monthly level since their introduction in 2009. The record number reflects both structural financial pressures and policy changes, including the removal of the application fee in April 2024, which has made the process more accessible.

However, industry observers say the scale of the increase goes far beyond administrative changes. Darryl Dhoffer, founder of The Mortgage Geezer, described the data as a clear signal that many households have reached a tipping point after years of financial pressure. He pointed to what he described as the “lag effect” of higher interest rates, which is now feeding through into household finances after a prolonged period of tightening monetary policy.

While the Bank of England’s base rate currently stands at 3.75 per cent, elevated borrowing costs have continued to squeeze mortgage holders and consumers carrying unsecured debt. At the same time, inflation, although easing from its peak, remains above target at around 3 per cent, limiting the extent to which households are seeing meaningful relief in day-to-day costs.

Tony Redondo, founder of Cosmos Currency Exchange, said the figures highlight how cumulative financial pressures are now manifesting in real-world outcomes. He noted that while the removal of fees has contributed to the rise in DROs, the broader trend reflects households “finally collapsing under accumulated debt from previous years”.

He warned that the outlook remains fragile, particularly in light of geopolitical uncertainty and the potential for renewed inflationary pressures linked to energy markets. Any sustained increase in inflation could force the Bank of England to keep interest rates higher for longer, further intensifying the strain on borrowers approaching refinancing deadlines.

Financial planners echoed concerns that the current data may represent the early stages of a wider deterioration. Nouran Moustafa, practice principal at Roxton Wealth, said the figures should not be viewed as a one-off spike but rather as part of a broader pattern of economic fragility.

She emphasised that behind the statistics lies significant human impact, with many households operating without any financial buffer. In such conditions, even relatively small increases in costs or interest rates can push individuals into insolvency.

The pressure is not limited to households. Company insolvencies rose by 7 per cent month-on-month to 1,878 in February, although they remain below levels seen during the peak of business failures between 2022 and 2025. Analysts suggest this reflects a mixed picture, with some businesses stabilising while others continue to face tightening margins and weakening demand.

Anita Wright, chartered financial planner at Ribble Wealth Management, said the data reflects a broader liquidity squeeze across the economy. She noted that rising bond yields are feeding into higher borrowing costs for businesses, while consumers facing higher living costs are cutting back on spending, further compressing margins.

This combination of weak growth and persistent inflation, often described as stagflationary conditions, creates a particularly challenging environment for both households and businesses. While some firms have been able to absorb pressures through cost-cutting or the use of reserves, that resilience is finite, and insolvency rates tend to rise once those buffers are exhausted.

The implications are also being felt in the workplace. Kate Underwood, founder of Kate Underwood HR and Training, warned that financial stress among employees is increasingly spilling over into business operations. She highlighted rising levels of absenteeism, reduced productivity and higher staff turnover as workers struggle to cope with mounting financial pressures.

For small businesses in particular, the challenge is acute. Unlike larger corporates, they often lack the financial flexibility to absorb rising wage demands or offer higher salaries, making them more vulnerable to workforce instability driven by cost-of-living pressures.

The latest figures also come at a time when expectations for interest rate cuts have been significantly scaled back. Prior to the recent escalation in geopolitical tensions, markets had anticipated multiple rate reductions in 2026. However, rising oil and gas prices have shifted expectations, with policymakers now more cautious about easing monetary policy.

This change in outlook could prove critical. As Redondo noted, the combination of higher rates, depleted savings and thin margins leaves both households and businesses exposed to further shocks. Should borrowing costs remain elevated or increase further, the risk of a broader wave of defaults and insolvencies could intensify.

For now, the data underscores a fundamental issue facing the UK economy: a growing number of households and businesses are operating with little to no margin for error. In such an environment, the difference between stability and financial distress can be measured in relatively small shifts in costs or income.

As policymakers weigh the next steps on interest rates and fiscal policy, the sharp rise in insolvencies serves as a clear warning signal that underlying financial pressures are not only persistent but increasingly visible across the economy.

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Individual insolvencies surge 18% as experts warn households are at ‘breaking point’

The Chancellor, Rachel Reeves, is set to unveil a sweeping £2 billion investment programme aimed at positioning the UK as the fastest adopter of artificial intelligence across the G7, in a major bid to reignite economic growth and strengthen Britain’s global competitiveness.

In a keynote speech in London, Reeves will outline a strategy centred on accelerating AI adoption across both the private and public sectors, with the government taking a more interventionist role in shaping how emerging technologies are deployed. The move signals a shift towards a more active industrial policy, with AI at its core.

The funding package will be directed not only at advancing AI capabilities but also at building the infrastructure required to support large-scale deployment. Central to this is expanded access to high-performance computing and the development of a national quantum computing programme, designed to unlock faster processing power and enable breakthroughs in areas such as healthcare diagnostics, energy optimisation and secure communications.

Reeves is expected to argue that the UK must play a leading role in determining how AI evolves globally, rather than adopting frameworks set by other nations. Framing the initiative as both an economic and strategic imperative, she is set to warn against ceding influence in a technology that is rapidly reshaping industries and societies.

The strategy will focus heavily on accelerating real-world adoption. Ministers plan to work closely with businesses, academic institutions and investors to embed AI tools across key sectors, from financial services and manufacturing to healthcare and local government. The NHS, in particular, is expected to be a major beneficiary, with AI applications aimed at improving efficiency, diagnostics and patient outcomes.

A significant component of the plan will also be regional growth. The government is expected to highlight initiatives such as the Oxford-Cambridge innovation corridor as focal points for AI development, talent cultivation and start-up activity, with the aim of spreading economic benefits beyond London and the South East.

The announcement comes at a time when the UK economy is facing subdued growth and rising global uncertainty, with policymakers increasingly looking to technology-driven productivity gains as a route to long-term expansion. By positioning AI as a foundational economic driver, Reeves is seeking to create what she has previously described as a “strategic and active state” approach to growth.

However, industry experts have cautioned that rapid adoption must be matched with robust governance and infrastructure. Stuart Harvey, chief executive of data specialist Datactics, warned that organisations are already beginning to rely on AI for decision-making, raising concerns about transparency and accountability.

He noted that without strong data foundations and auditability, AI-driven decisions could become opaque and difficult to challenge, particularly in high-stakes environments such as public policy or corporate strategy. The risk, he suggested, is that poorly governed adoption could lead to significant economic and societal consequences.

Similarly, Sachin Agrawal, managing director of Zoho UK, welcomed the ambition but stressed the importance of targeted investment. He argued that success would depend on strengthening digital infrastructure, developing regional talent pipelines and ensuring responsible data management.

Agrawal also highlighted the critical role of regulation, suggesting that effective oversight should not be seen as a barrier to innovation but as a means of building trust. Without clear standards and accountability, he warned, public confidence in AI could be undermined by high-profile failures.

The government is expected to acknowledge these challenges, with plans to support workforce reskilling and ensure that regulatory frameworks evolve alongside technological advancements. As AI becomes more deeply embedded in business operations and public services, the pressure on policymakers to balance innovation with oversight is set to intensify.

Reeves’ announcement reflects a broader global race to harness artificial intelligence as a driver of productivity and economic growth. With the US and China investing heavily in AI infrastructure and development, the UK’s strategy is designed to ensure it remains competitive on the world stage.

Whether the £2 billion investment will be sufficient to achieve that ambition remains an open question. However, the signal from government is clear: AI is no longer a peripheral policy area, but a central pillar of the UK’s economic future.

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Rachel Reeves unveils £2bn AI push to make UK fastest adopter in G7

Financial experts and industry figures are urging Chancellor Rachel Reeves to reconsider controversial plans to cap National Insurance relief on pension contributions at £2,000 a year, warning the move could undermine long-term savings and disrupt workplace pension schemes.

The proposal, currently under scrutiny in the House of Lords, would limit the amount of National Insurance relief available on pension contributions made through salary sacrifice arrangements. Critics argue that while the policy is framed as a measure to improve fairness, it risks acting as a disincentive to save and could have unintended consequences for both employees and employers.

Peers have already signalled concern, submitting amendments to raise the cap to £5,000. The revised legislation is expected to return to the House of Commons next week, setting up a potential flashpoint in the government’s wider fiscal strategy.

At the heart of the debate is the role salary sacrifice schemes play in encouraging pension contributions. These arrangements allow employees to exchange a portion of their salary for pension contributions, reducing both income tax and National Insurance liabilities while boosting retirement savings.

Nouran Moustafa, Practice Principal and independent financial adviser at Roxton Wealth, warned that imposing a £2,000 cap could have a material impact on long-term financial outcomes. She argued that the measure risks eroding retirement pots by tens of thousands of pounds over time due to lost compounding, while also weakening the behavioural incentives that encourage consistent saving.

For policymakers, she suggested, the trade-off is stark: short-term fiscal gains versus long-term retirement adequacy. By reducing incentives, participation in pension schemes could decline, potentially increasing future reliance on the state.

Other advisers echoed concerns that the policy could destabilise employer-backed pension structures. Rob Mansfield, an independent financial adviser at Rootes Wealth Management, said repeated changes to pension rules risk damaging confidence in the system altogether.

He pointed to the broader objective of fostering a savings culture, arguing that frequent policy adjustments could discourage individuals from committing to long-term financial planning. There are also doubts over whether the measure would deliver the expected tax revenues, as businesses may restructure remuneration to mitigate the impact.

From an employer perspective, the proposed cap could introduce additional complexity and cost. Kate Underwood, founder of Kate Underwood HR and Training, described the move as a “blunt tax grab dressed up as fairness”, warning it could force companies to rethink salary sacrifice schemes that have become a standard part of remuneration strategies.

She noted that many small and medium-sized businesses rely on these arrangements as a practical way to enhance pension provision without escalating direct salary costs. Introducing additional National Insurance burdens, she said, could lead to schemes being scaled back or scrapped entirely, with knock-on effects for employee engagement and morale.

There are also concerns that the cap could affect a broader group than intended. While the policy is often positioned as targeting higher earners, advisers argue it may also capture mid-career professionals who are increasing contributions later in life to catch up on retirement savings.

Rohit Parmar-Mistry, founder of Pattrn Data, said a hard cap risks penalising exactly those individuals who are finally in a position to save meaningfully. He suggested a more targeted or tapered approach would better address concerns about excessive tax advantages without discouraging responsible saving behaviour.

The debate comes at a time when the government is under increasing pressure to balance fiscal discipline with policies that support long-term economic resilience. Pension savings are widely seen as a critical component of that balance, reducing future pressure on public finances while supporting individual financial security.

With the legislation now moving back to the Commons, the coming weeks are likely to prove decisive. For businesses, advisers and savers alike, the outcome will signal whether the government intends to prioritise short-term revenue generation or maintain the incentives that underpin the UK’s workplace pension system.

For now, the message from across the industry is clear: any reform must be carefully calibrated. A policy designed to promote fairness, they argue, should not come at the cost of weakening one of the most effective mechanisms for building long-term financial stability.

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Experts warn pension tax cap risks undermining retirement savings as pressure mounts on Chancellor to rethink

Alcohol-free beer has been added to the UK’s official inflation basket, in a move that underlines changing consumer habits and the growing shift towards healthier lifestyles.

The Office for National Statistics (ONS) confirmed that the product will join more than 760 goods and services used to calculate key inflation measures, including the Consumer Prices Index (CPI), the Retail Prices Index (RPI) and CPIH — its preferred gauge of price growth.

The inclusion reflects a marked rise in demand for low- and no-alcohol alternatives, with the ONS citing increased sales volumes, wider product ranges and greater shelf space dedicated to alcohol-free options across UK retailers. The move is widely seen as recognition of a broader cultural shift, particularly among younger consumers and professionals prioritising wellbeing.

Alongside alcohol-free beer, hummus and pet grooming have also been added to the basket, highlighting how evolving lifestyle choices are reshaping the cost-of-living calculation. The ONS said hummus had gained prominence due to its growing popularity among health-conscious consumers, with UK spending on the product estimated to have reached around £170 million in 2024.

Pet grooming, meanwhile, reflects the continued boom in pet ownership, particularly among smaller, high-maintenance breeds, and the increasing willingness of households to spend on services rather than just goods. Analysts note that services inflation has become a key driver of overall price pressures in recent years, making its accurate representation in the basket increasingly important.

The annual update to the basket is designed to ensure inflation data remains aligned with real-world spending patterns. Items that decline in relevance are removed to make room for emerging trends. This year, bottled premium lager purchased in pubs and restaurants has been dropped, alongside traditional sheets of wrapping paper, which are being replaced by rolls that better reflect modern purchasing behaviour.

Other additions include dashboard cameras and motorhomes, both of which have seen rising demand. Dashcams have grown in popularity as motorists seek to reduce insurance costs and improve security, while motorhomes have benefited from lifestyle shifts following the pandemic and a rise in early retirement trends.

The updated basket will be used in the next set of inflation figures, due to be published on 25 March, and comes at a time of heightened sensitivity around the cost of living. While inflation eased to 3 per cent in January, down from 3.4 per cent in December, economists expect renewed upward pressure in the coming months, driven in part by surging global energy prices linked to the ongoing Middle East conflict.

The Bank of England, which targets inflation at 2 per cent, is widely expected to hold interest rates at 3.75 per cent at its next meeting, as policymakers weigh the risk of rising fuel and transport costs feeding through into broader price increases.

In parallel with the basket update, the ONS is also modernising how inflation is measured. A new system will draw on vast datasets from retailers, analysing around 300 million price points across more than one billion products each month. This marks a significant shift away from traditional in-store price collection, which relied on around 25,000 manually gathered data points.

The move towards real-time, high-volume data is expected to improve the accuracy and responsiveness of inflation reporting, particularly in fast-moving sectors such as groceries, energy and consumer goods.

For households, however, the underlying message remains unchanged. Despite some easing in headline inflation, rising energy costs and global uncertainty mean the pressure on everyday spending is unlikely to disappear any time soon. The inclusion of alcohol-free beer, hummus and pet grooming may signal changing lifestyles, but it also reflects the broader reality that the cost of modern living continues to evolve.

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Alcohol-free beer, hummus and pet grooming join inflation basket as UK spending habits shift