Business

Barclays is scaling back lending to smaller businesses and private credit firms after suffering losses linked to the collapse of several high-risk lenders, in a move that signals growing caution across the banking sector.

The lender is understood to be reducing its exposure to asset-based lending for smaller borrowers and shifting its focus towards larger, more established corporate debt providers. The strategy change follows the failures of firms including Market Financial Solutions and Tricolor Holdings, which have triggered losses and heightened concerns about risk within the fast-growing private credit market.

According to reports, Barclays has withdrawn from a number of deals and increased pricing on others to reflect the higher perceived risk environment. The move reflects a broader reassessment of private credit, a sector that has attracted significant investment in recent years due to its promise of higher returns, often in the range of 8 to 10 per cent annually.

However, those returns are frequently underpinned by leverage, amplifying both gains and potential losses. Recent events have exposed vulnerabilities in the sector, including concerns over transparency, asset valuations and rising default rates in a higher interest rate environment.

The collapse of Market Financial Solutions has been particularly damaging. The lender entered administration earlier this year after a High Court judge ordered an investigation into alleged fraud and financial mismanagement. Insolvency practitioners have since claimed there is compelling evidence of serious irregularities, including the possibility that some loans may be entirely unsecured.

Central to the investigation are allegations of “double pledging”, where the same property is used as collateral for multiple loans, a practice that can render assets unrecoverable if borrowers default. Alongside Barclays, several global financial institutions are understood to have exposure to the failed lender.

Barclays chief executive C.S. Venkatakrishnan acknowledged the issue last week, describing the bank’s exposure as “disappointing” but indicating that total losses would remain below £500 million.

The bank’s actions are also under scrutiny. Barclays froze Market Financial Solutions’ accounts last November, a move that insolvency practitioners have suggested may indicate concerns about potential money laundering or other criminal activity. Investigations are ongoing, including oversight from the Financial Conduct Authority.

The fallout has extended beyond the UK. The collapse of Tricolor Holdings, a US-based subprime automotive lender, has added to concerns about the resilience of private credit markets globally, particularly as higher borrowing costs strain borrowers and investors alike.

Recent developments have also unsettled investors, with some private credit funds restricting withdrawals amid rising uncertainty. Analysts say this reflects a shift in sentiment as the sector faces its first significant stress test since its rapid expansion following the global financial crisis.

For Barclays, the decision to pivot towards larger corporate clients suggests a more conservative approach to risk as market conditions tighten. It also raises questions about access to finance for smaller businesses, which may find credit conditions becoming more restrictive as banks reassess their exposure.

The situation underscores the growing tension within financial markets between the search for higher returns and the need for robust risk management — a balance that is being tested as economic conditions become more volatile.

As the investigations continue and the full scale of losses becomes clearer, the implications for both lenders and borrowers are likely to reverberate across the private credit landscape.

Read more:
Barclays pulls back from small business lending after private credit losses

Co-op Group has confirmed that chief executive Shirine Khoury-Haq will step down, following mounting pressure over workplace culture concerns and a difficult year marked by losses and a damaging cyberattack.

Khoury-Haq, who has led the organisation since 2022 and spent seven years with the business, will be replaced on an interim basis by Kate Allum while the board begins the search for a permanent successor.

Her departure comes after reports of a “toxic culture” within senior leadership, alongside claims of falling morale, high-profile departures and operational challenges across the group.

The Co-op revealed that it swung to an underlying pre-tax loss of £126 million in its latest financial year, compared with a £45 million profit the previous year. Revenues also declined by 2.3 per cent to £11 billion, reflecting disruption to trading and changing consumer behaviour.

The group said the results were heavily shaped by its response to a major cyberattack, which forced it to restrict systems in an effort to contain the threat. While necessary, the measures had a significant commercial impact.

The company estimates the attack reduced revenues by £285 million and cut profitability by £107 million, including £86 million in lost margin and £21 million in additional costs.

The food division, the largest part of the business, was particularly affected, with sales falling 2 per cent to £7.25 billion. The disruption led to empty shelves in stores and altered shopping patterns, which continued to weigh on performance even after systems were restored.

Market share also slipped, falling to 5 per cent over a 12-week period, down from 5.3 per cent a year earlier, as the group lost ground to discounters and larger supermarket rivals.

Alongside the financial pressures, the organisation has faced scrutiny over its internal culture. A letter sent to board members, reportedly from senior staff, described an environment of “fear and alienation”, raising questions about leadership and decision-making at the top of the business.

The Co-op said it did not recognise those criticisms as representative of the wider organisation, emphasising its co-operative structure and commitment to inclusive decision-making. However, the reports have added to the challenges facing the group during a period of significant change.

Khoury-Haq said the timing of her departure reflects the next phase of the company’s transformation strategy.

“It has been an honour to lead our Co-op,” she said, adding that the business is now positioned to move forward with a programme of stabilisation and long-term reform that will extend beyond her planned tenure.

Her strategy had focused on rebuilding the group’s financial position, reducing debt and modernising its IT systems — issues that have been central to the Co-op’s operational challenges in recent years.

The company said she had overseen a significant turnaround between 2022 and 2024, including a 95 per cent reduction in debt and a 30 per cent increase in profits over that period, before the latest setbacks.

The Co-op, which employs around 54,000 people and operates more than 2,300 food stores and 800 funeral homes, continues to face intense competition across its core markets.

Discounters such as Aldi and Lidl have expanded aggressively, while established rivals including Tesco and Sainsbury’s have strengthened their positions, leaving the Co-op under pressure to differentiate its offering.

At the same time, the wider economic environment remains challenging, with inflation, shifting consumer behaviour and geopolitical uncertainty affecting demand.

Khoury-Haq acknowledged these headwinds, warning that “trading conditions remain difficult” and that external pressures are likely to persist.

The board now faces the task of appointing a new chief executive capable of navigating the next stage of the group’s recovery and transformation.

Group chair Debbie White thanked Khoury-Haq for her leadership during a turbulent period, particularly in guiding the organisation through the cyberattack and broader restructuring efforts.

For the Co-op, the leadership transition comes at a critical juncture. Restoring profitability, rebuilding trust internally and externally, and adapting to a rapidly evolving retail landscape will be central to its future.

As the organisation seeks to stabilise after a challenging year, the next phase of its strategy will be closely watched by both the market and its millions of members.

Read more:
Co-op chief executive steps down amid culture concerns and cyberattack fallout

Britain is heading towards a significant shortage of mechanics trained to service electric vehicles, raising concerns that the country’s transition to cleaner transport could outpace the workforce needed to support it.

New analysis from the Institute of the Motor Industry suggests the UK could be short of 44,000 EV-qualified technicians by the time petrol and diesel car production is phased out, under current government targets.

While ministers have reaffirmed plans to ban the sale of new internal combustion engine vehicles by 2035, only around a quarter of the UK’s mechanics are currently trained to work on electric cars. The gap between policy ambition and workforce readiness is widening, particularly among smaller independent garages.

A key concern is the uneven distribution of EV expertise. A disproportionate number of qualified technicians are employed by larger national chains such as Kwik-Fit, which have the scale and resources to invest in training and benefit from servicing contracts with corporate EV fleets.

By contrast, many smaller, independent garages, which make up a large part of the UK’s automotive repair network, remain hesitant to invest in EV training. Owners cite a lack of local demand, high training costs and uncertainty over the pace of the transition.

In areas where electric vehicle adoption remains low, particularly outside major urban centres, garage operators say the business case for upskilling staff is not yet compelling.

For many workshop owners, the decision comes down to economics. Traditional repair work — such as servicing engines, clutches and fuel systems — remains a core revenue stream, yet these components are largely absent in electric vehicles.

EVs typically require less maintenance and fewer moving parts, reducing both the frequency and value of repair work. Even routine checks such as MoTs tend to involve less labour, further eroding potential income for independent garages.

This structural shift is creating uncertainty across the sector, with some operators concerned that investing in EV capability could fail to deliver sufficient returns in the short term.

The transition is also being shaped by regional disparities in EV uptake. In some parts of the UK, particularly rural areas, demand remains limited, reinforcing reluctance among smaller businesses to invest.

Consumers are already experiencing the consequences. In some cases, EV owners have been forced to travel long distances to access qualified repair services, as local garages lack the necessary expertise or equipment.

This highlights a growing disconnect between national policy and local infrastructure, both in terms of charging networks and servicing capacity.

Broader uncertainty around global EV policy is adding to the hesitation. Shifts in international markets, including changes to electric vehicle targets in the United States and Europe, have made some business owners wary of committing to long-term investment.

At the same time, the UK government has introduced measures such as expanded charging infrastructure and new road pricing proposals for EVs, but these have yet to fully translate into stronger consumer demand.

Despite these challenges, industry analysts believe the transition to electric vehicles is ultimately inevitable.

Even if policy timelines shift, manufacturers have already invested heavily in electrification, and EVs are expected to dominate new car sales within the next decade. Quentin Le Hetet of automotive analysts GiPA suggests that electric vehicles could outnumber petrol and diesel cars on UK roads by the mid-2030s.

However, the pace of that transition will depend heavily on whether supporting industries, including repair and maintenance, can keep up.

Experts warn that without targeted support, independent garages could be left behind, with larger operators and manufacturer-approved service centres capturing a growing share of the market.

Peter Wells, of the Centre for Automotive Industry Research, said the shift could fundamentally reshape the sector, with manufacturers increasingly controlling access to repair data and systems.

This trend raises concerns about competition, pricing and the long-term viability of smaller businesses that have traditionally formed the backbone of the UK’s automotive repair industry.

The Institute of the Motor Industry has called for increased funding to support training and workforce development, warning that without intervention, the skills gap could become a major bottleneck in the UK’s net zero ambitions.

For policymakers, the challenge is clear: ensuring that the transition to electric vehicles is not only technologically feasible, but also economically and operationally sustainable.

For the thousands of garages across the country, the message is equally stark; adapt to the electric future or risk being left behind as the automotive industry undergoes its most profound transformation in decades.

Read more:
UK faces looming shortage of EV mechanics as transition gathers pace

More than 2,000 North Sea jobs have been safeguarded after HM Revenue & Customs agreed not to pursue further legal action against a restructuring deal involving Petrofac, clearing the way for the sale of its UK business to US engineering firm CB&I.

The decision removes a major obstacle that had threatened to derail the transaction and push Petrofac’s North Sea operations into insolvency, with potentially severe consequences for workers, supply chains and energy infrastructure.

HMRC had been seeking to recover more than £150 million from Petrofac relating to a long-running tax dispute, and had argued that the proposed debt restructuring was unfair because it would leave the tax authority with just £3 million, while other creditors stood to recover a greater proportion of their claims.

However, Scotland’s Court of Session rejected HMRC’s challenge earlier this month, and the tax authority has now confirmed it will not appeal that ruling. The move effectively clears the path for completion of the rescue deal, which is contingent on significant debt write-offs across the group.

Petrofac had warned that without swift resolution, its UK asset solutions division, which employs around 2,250 people and operates approximately 20 North Sea platforms, was at risk of running out of cash and collapsing.

Such an outcome would likely have triggered emergency contingency measures to maintain offshore operations, potentially leading to a break-up of the business and significant job losses.

The company, once a FTSE 100 constituent, employs around 8,000 people globally and has been under sustained pressure in recent years, grappling with a combination of legal issues, project delays and financial strain.

The asset solutions division had continued trading after Petrofac entered administration in October, and a deal was agreed in December to sell the business to CB&I.

The transaction is seen as a viable route to preserve operations and employment, while providing a stable long-term owner for the business.

Petrofac said it is now focused on completing the sale “as soon as possible”, describing CB&I as “an excellent fit” that offers a positive outcome for both the company and its workforce.

In his judgment, Lord Sandison criticised HMRC’s handling of the case, highlighting delays in pursuing the tax claim, which dates back to alleged avoidance issues between 1999 and 2014, allegations Petrofac denies.

The judge noted that the liability was not formally assessed until 2020 and was not scheduled for tribunal determination until 2025, describing the pace of enforcement as “very leisurely”.

He concluded that HMRC’s position in 2026 was due “at least as much to its own inaction” as to the restructuring itself, suggesting the dispute could have been resolved much earlier.

The resolution of the case underscores the delicate balance between creditor rights and the need to preserve viable businesses and jobs in complex restructurings.

For the UK’s energy sector, the outcome is particularly significant. Petrofac’s North Sea operations play a critical role in maintaining offshore infrastructure, and disruption could have had wider implications for production and supply chains.

The case also highlights the challenges facing companies in the oil and gas services industry, which has been navigating a difficult period marked by regulatory scrutiny, shifting energy policies and financial pressures.

With the legal uncertainty now removed, attention will turn to finalising the sale and stabilising operations under new ownership.

For workers and stakeholders, the decision represents a reprieve after months of uncertainty. For Petrofac, it marks a crucial step in its restructuring process.

And for policymakers and regulators, the case serves as a reminder of the importance of timely intervention, and the potential consequences when disputes drag on in critical sectors of the economy.

Read more:
North Sea jobs safeguarded as HMRC drops challenge to Petrofac rescue deal

Lightning is one of nature’s most sudden and powerful forces, capable of causing extensive damage to property and infrastructure and posing serious risks to human safety.

Traditional methods of predicting lightning events have often relied on general weather forecasts or historical data, which may not provide precise insights into localized strike patterns. With the increasing complexity of modern environments, understanding where and when lightning might strike has become more crucial than ever for planners, engineers, and safety professionals. Advances in technology are now enabling more sophisticated approaches to anticipating these dangerous events.

Lightning risk assessment is one method that combines meteorological data, terrain analysis, and historical strike patterns to evaluate the likelihood of lightning in a given area. By integrating AI into this process, experts can analyze vast datasets to identify potential high-risk zones and predict strikes with greater accuracy. This approach supports informed decision-making, helping communities and infrastructure prepare for one of nature’s most unpredictable hazards.

Understanding the Challenge of Lightning Prediction

Forecasting lightning is recognized as one of meteorology’s greatest challenges. The variables at play include temperature changes, shifts in humidity, fluctuating wind patterns, and the constant evolution of cloud structures. Each of these factors can influence the likelihood and behavior of electrical storms. Traditional forecasting tools often struggle to incorporate this complexity in real time, leading to missed warnings or false alarms. This ongoing uncertainty has driven the search for more advanced solutions, particularly in regions with frequent thunderstorms.

AI’s Role in Enhancing Lightning Forecasts

AI is revolutionizing predictive meteorology by rapidly and accurately processing immense datasets. Machine learning algorithms are trained on both historical and current weather data, uncovering correlations that are often invisible to human analysts. These algorithms continuously learn and adapt, fine-tuning their predictive accuracy with every new data point. By aggregating information from satellite feeds, ground-based lightning detection networks, and atmospheric sensors, AI-driven systems generate dynamic, location-specific forecasts that far exceed the reliability of legacy models.

Notable AI-Driven Lightning Prediction Systems

Many groundbreaking lightning prediction systems are now operational, each leveraging AI in unique ways to improve public safety and disaster prevention:

NOAA’s LightningCast: The National Oceanic and Atmospheric Administration’s LightningCast platform uses AI to analyze satellite imagery, providing lightning forecasts up to one hour in advance. This is especially beneficial for outdoor events and aviation, helping to reduce lightning-related incidents.
Bar-Ilan University’s AI Model: Researchers at Bar-Ilan University in Israel have developed an AI model that predicts lightning-induced wildfires with over 90% accuracy. Drawing on seven years of satellite data and accounting for factors such as vegetation and weather, this innovation supports regions at risk of lightning and wildfires.

Benefits of AI in Lightning Prediction

Improved Accuracy: AI can manage and interpret complex, high-volume datasets, enabling meteorologists to make more precise, dependable lightning forecasts. This reduces the likelihood of both missed warnings and unnecessary panic.
Timely Warnings: Advanced prediction enables earlier alerts, giving people and organizations more time to implement protective measures. This is critical for safeguarding those in exposed areas such as parks, sports arenas, and construction sites.
Resource Optimization: With more accurate forecasts, emergency services can plan and deploy interventions more efficiently. This optimizes personnel deployment and reduces the costs associated with over-preparation or inefficient responses.

Challenges and Considerations

Implementing AI in meteorology presents several key challenges and considerations. The effectiveness of AI systems depends heavily on the quality, consistency, and comprehensiveness of input data, as gaps or biases can compromise reliability and lead to inaccurate predictions. Model interpretability is another concern, as many AI models operate in an opaque manner, making it difficult for users and decision-makers to understand how conclusions are reached. Enhancing transparency is essential for building trust and encouraging adoption among meteorological agencies and the public. Additionally, integrating AI-driven predictions into existing forecasting infrastructures requires compatible technology and adjustments to operational protocols, ensuring that both broad-scale forecasts and hyper-local alerts are delivered effectively.

Future Directions

The future of AI in lightning prediction is full of potential. Researchers are actively seeking ways to refine algorithms, enrich real-time data collection, and further blend AI-driven insights with current meteorological models. Encouraging collaborations among atmospheric scientists, computer engineers, and public policy experts will be vital in driving these advancements forward.

Expanded interdisciplinary efforts and real-world testing are expected to set new safety standards. In addition, ongoing projects by global leaders like the World Meteorological Organization highlight the universal relevance of AI-powered lightning forecasting, setting the stage for more robust disaster risk reduction efforts worldwide. For more details, NOAA explores the role of AI in modern weather forecasting. As these technologies evolve, communities can anticipate increasingly proactive and precise measures to mitigate lightning-related risks.

Conclusion

AI is rapidly enhancing our ability to predict and manage lightning strikes, delivering critical improvements in accuracy, warning times, and response strategies. Despite present challenges such as data integrity and system transparency, the field is moving swiftly toward comprehensive solutions that help build safer, more resilient communities. As technological innovations in lightning risk assessment become more widely adopted, society stands to gain from fewer casualties, protected property, and a more informed response to one of nature’s most formidable dangers.

Read more:
AI and Lightning Risk: Predicting Strikes Before They Happen

ScottishPower has secured £600 million in financing from the National Wealth Fund to support the development of a major subsea electricity link designed to strengthen the UK’s energy security and accelerate the transition to clean power.

The funding will go towards Eastern Green Link 4 (EGL4), a 2GW high-voltage direct current (HVDC) cable running between Fife in Scotland and Norfolk in England. At approximately 530 kilometres in length, the project will be capable of transmitting enough electricity to power around 1.5 million homes.

EGL4 is part of a new generation of long-distance, bidirectional subsea infrastructure aimed at modernising the UK’s electricity grid. By enabling renewable energy generated in Scotland, particularly wind power, to be transported efficiently to demand centres in England, the link is expected to reduce grid congestion and cut so-called “constraint costs”, where excess energy is wasted or curtailed.

The project is also intended to reduce reliance on imported fossil fuels, which remain vulnerable to global price shocks and geopolitical instability.

Energy Minister Michael Shanks said such grid upgrades are essential to stabilising energy costs and maximising the benefits of domestic clean power generation.

“Grid investment is key to getting Britain off the rollercoaster of fossil fuel prices,” he said, adding that projects like EGL4 will also support job creation and regional economic growth.

The financing builds on a previous £600 million loan provided by the National Wealth Fund in 2025 to support a portfolio of ScottishPower network projects, highlighting an ongoing partnership between government-backed capital and private sector investment.

Chancellor Rachel Reeves said the deal demonstrates the role of the fund in supporting strategic national infrastructure.

“This is exactly why we created the National Wealth Fund, to put the full power of government behind strategic investment that secures Britain’s future,” she said.

Oliver Holbourn, chief executive of the fund, added that backing projects like EGL4 is critical to ensuring the UK’s energy system is “fit for the future”.

The project forms part of a broader expansion of electricity networks required to meet the UK’s clean energy ambitions. According to the National Energy System Operator, around £58 billion of investment will be needed across Great Britain by 2035 to deliver a fully decarbonised power system.

ScottishPower’s parent company, Iberdrola, has committed to investing £12 billion in UK transmission and distribution networks by 2028 as part of its wider electrification strategy.

Keith Anderson, chief executive of ScottishPower, said the new financing would help accelerate delivery of critical infrastructure aligned with the government’s Clean Power 2030 targets.

Beyond energy security, the project is expected to deliver broader economic benefits. ScottishPower has indicated it will expand its workforce, particularly in central and southern Scotland, to support network upgrades and construction activity.

Douglas Alexander said the investment reflects a commitment to “kickstarting economic growth” while strengthening national infrastructure.

The EGL4 project underscores a wider shift in UK energy policy towards large-scale electrification and grid modernisation, recognising that renewable generation alone is insufficient without the infrastructure to distribute it efficiently.

As demand for electricity rises — driven by electrification of transport, heating and industry, the ability to move power across regions will become increasingly critical.

By combining public financing with private sector delivery, the government is aiming to accelerate deployment while ensuring projects of national significance can proceed despite the scale of investment required.

For the UK, projects like EGL4 represent more than infrastructure upgrades, they are foundational to building a more resilient, self-sufficient and low-carbon energy system capable of withstanding future global shocks.

Read more:
ScottishPower secures £600m backing for major UK subsea power link

Revolut has reported record pre-tax profits of £1.7 billion for 2025, up 57 per cent year-on-year, as the fast-growing fintech prepares to expand further into mainstream banking products, including credit cards in the UK.

The results mark a significant milestone for the London-based group, which recently secured a full UK banking licence from the Bank of England, a development that unlocks a broader range of lending products and signals its transition from a payments platform into a fully-fledged global bank.

Chief financial officer Victor Stinga said the launch of credit cards in the UK is now a “key area of focus” for the business, alongside plans to roll out unsecured personal loans and overdraft facilities to its 13 million UK customers.

The move reflects Revolut’s strategy to deepen relationships with existing users by becoming their primary banking provider, not just a secondary app for payments or foreign exchange.

The company is currently migrating customers from its original payments infrastructure to a more comprehensive banking platform, allowing it to offer a wider suite of financial services.

Revolut’s financial performance highlights the scale of its expansion. Group revenues rose 46 per cent to £4.5 billion, while profit margins increased to 38 per cent, underlining the efficiency of its technology-driven model.

Customer growth remains a central driver. The company now serves more than 70 million users globally, up from 68.3 million at the end of 2025, and operates in over 40 countries.

Business accounts are also becoming an increasingly important segment, with the number of corporate clients rising 33 per cent to 767,000. At the same time, more retail customers are using Revolut as their main bank, paying in salaries and managing day-to-day finances through the platform.

Stinga noted that the company now has 11 different product lines each generating more than £100 million in annual revenue, evidence of a more diversified and resilient business model.

Despite its rapid growth and a valuation of $75 billion following a secondary share sale last year, making it Europe’s most valuable private tech company, Revolut is downplaying speculation about an imminent stock market listing.

Stinga said no decisions had been made on the timing or location of a potential initial public offering, emphasising that management remains focused on product development and international expansion rather than capital markets.

The results also show a shift away from reliance on crypto trading, which was once a key revenue driver. While the wealth division, including crypto, grew revenues by 31 per cent to £663 million, it was the slowest-growing segment of the business.

“Dependency on crypto is now much less,” Stinga said, reflecting a broader industry trend following volatility in digital asset markets.

To sustain its expansion, Revolut significantly increased spending on marketing and brand visibility, with sales and marketing costs rising 47 per cent to £650 million.

The company now has advertising placements in 18 airports across 11 countries and high-profile sponsorship deals with Manchester City and the Audi Formula 1 Team, signalling a shift from organic growth to a more traditional customer acquisition strategy.

Credit losses more than doubled to £61 million as the loan book expanded rapidly to £2.2 billion, up 120 per cent. However, losses as a proportion of lending declined, which the company says demonstrates the strength of its credit assessment systems.

Revolut also reported a “significant reduction” in fraud rates, attributing this to enhanced use of artificial intelligence to detect and prevent fraudulent activity, an area where the company has previously faced scrutiny.

Chief executive Nik Storonsky described 2025 as “another landmark year”, highlighting the company’s ability to achieve profitability at scale while continuing to expand globally.

“We have built a diversified, resilient business that is profitable at scale, providing the foundation for our next phase of growth,” he said.

As Revolut pushes deeper into traditional banking services and continues its global expansion, its challenge will be to maintain growth while navigating regulatory complexity and increasing competition from both established banks and rival fintechs.

With a strengthened balance sheet, a growing customer base and new products on the horizon, the company is positioning itself not just as a disruptor, but as a central player in the future of global banking.

Read more:
Revolut posts record £1.7bn profit as it eyes UK credit card launch

The head of the world’s largest asset manager has warned that a sustained surge in oil prices to $150 a barrel could push the global economy into a sharp recession, as geopolitical tensions continue to destabilise energy markets.

Larry Fink, chief executive of BlackRock, said the trajectory of the Middle East conflict, particularly the role of Iran, will determine whether the world faces a temporary disruption or a prolonged economic shock.

“If oil prices stay elevated and Iran remains a threat, that will have profound implications,” he said, warning that a scenario of sustained high prices could lead to “a probably stark and steep recession”.

Fink outlined two contrasting outcomes for global markets.

In a more optimistic scenario, a resolution to the conflict and a stabilisation of relations could see oil prices fall back below pre-war levels, easing inflationary pressures and supporting growth.

However, in the more pessimistic case, prolonged instability could drive oil prices above $100, and potentially towards $150, for several years. That would significantly increase costs for businesses and consumers, acting as a drag on economic activity worldwide.

Energy prices have already surged in recent weeks, with Brent crude climbing sharply amid disruptions to supply routes and heightened uncertainty over future production.

Fink emphasised that rising energy prices disproportionately affect lower-income households, describing them as a “very regressive tax”.

“Higher energy costs hit the poorest the hardest,” he said, noting that sustained increases would not only dampen consumer spending but also exacerbate inequality.

The warning comes as governments, including the UK, face growing pressure to shield households and businesses from rising costs, even as public finances remain stretched.

The BlackRock chief urged policymakers to adopt a pragmatic approach to energy policy, combining existing fossil fuel resources with accelerated investment in renewables.

“Use what you have, unquestionably, but also aggressively move towards alternative sources,” he said.

He argued that high oil prices could ultimately accelerate the global transition to cleaner energy, as countries seek to reduce dependence on volatile fossil fuel markets. Solar and wind power, in particular, could see rapid expansion if energy costs remain elevated.

However, he warned that progress has been uneven. While China is investing heavily in solar and nuclear capacity, Europe risks falling behind due to slow implementation and regulatory inertia.

Despite market volatility, Fink dismissed comparisons with the 2007–08 financial crisis, insisting that today’s financial system is far more resilient.

“I don’t see any similarities at all, zero,” he said, arguing that while some stress is emerging in areas such as private credit funds, it represents a small portion of the overall market.

Fink also addressed concerns about a potential bubble in artificial intelligence, rejecting the idea that investment in the sector is overinflated.

“I do not believe we have a bubble at all,” he said, although he acknowledged that some companies may fail as the technology evolves.

He argued that AI is part of a broader race for technological dominance, particularly between the US and China, and that continued investment is essential to remain competitive.

At the same time, he highlighted the transformative impact AI is likely to have on the labour market. While some traditional office roles may decline, he expects significant job creation in skilled trades.

“There will be enormous demand for electricians, welders and plumbers,” he said, suggesting that societies will need to rethink their approach to education and career pathways.

With BlackRock overseeing around $14 trillion in assets, Fink’s outlook carries significant weight among policymakers and investors.

His warning underscores the fragile state of the global economy, where energy markets, geopolitical tensions and technological change are converging to reshape growth prospects.

For now, the key variable remains oil. If prices continue to climb towards the $150 threshold, the risk of recession will rise sharply, forcing governments and central banks to navigate an increasingly complex and volatile economic environment.

Read more:
Blackrock chief warns $150 oil could trigger global recession

UK factory costs have surged at their fastest rate since the aftermath of the Black Wednesday, as rising energy prices linked to the Middle East conflict ripple through the economy and threaten to reignite inflation.

Fresh data from S&P Global shows that production costs in British manufacturing accelerated sharply in March, while overall private sector growth slowed to what economists described as “a crawl”.

The figures, drawn from the closely watched Purchasing Managers’ Index (PMI), point to a rapid deterioration in business conditions, driven by soaring oil and gas prices, disrupted supply chains and weakening demand.

The spike in costs has been directly linked to the surge in global energy prices following the escalation of conflict in the Middle East. The effective closure of key shipping routes such as the Strait of Hormuz has constrained supply, pushing up prices for fuel and raw materials used across manufacturing and food production.

The manufacturing input prices index jumped to 70.2 in March from 56 the previous month, its highest level since late 2022 and the steepest increase since October 1992, the month following Black Wednesday, when the pound’s collapse drove up the cost of imports.

Brent crude oil prices have risen by more than 40 per cent since late February, reaching around $100 a barrel, adding significant cost pressure to energy-intensive industries.

At the same time, the broader UK economy is losing momentum. The composite PMI, which measures activity across manufacturing and services, fell to 51 in March, down from 53.7 in February and below analysts’ expectations.

While still above the 50 threshold that separates growth from contraction, the figure represents a six-month low and signals a marked slowdown.

Both key sectors showed weakening performance. The manufacturing PMI edged down to 51.4, while services activity, a major driver of the UK economy, dropped more sharply to 51.2 from 53.9.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said companies were increasingly attributing lost business directly to the fallout from the Middle East conflict.

“Output growth has slowed to a crawl as firms face heightened risk aversion among customers, rising costs, higher interest rates and ongoing supply chain disruption,” he said.

The rapid increase in input costs is feeding concerns that the UK could face a renewed inflation surge, potentially pushing consumer price growth above 5 per cent later this year if energy prices remain elevated.

Economists warn that the speed of the shift has been particularly striking. Paul Dales of Capital Economics said the scale and pace of the changes had surprised analysts, even given the expected impact of an energy shock.

The PMI data is often seen as an early indicator of official inflation figures, which are produced by the Office for National Statistics. While inflation is expected to remain around 3 per cent in the short term, the Bank of England has already signalled it could rise further in the coming months.

Financial markets have responded by revising expectations for monetary policy, with traders now anticipating multiple interest rate increases this year from the current level of 3.75 per cent.

Higher borrowing costs would place additional strain on businesses and households, further dampening economic activity and complicating the government’s efforts to support growth.

Business sentiment has already weakened, falling to a nine-month low, while companies have continued to cut jobs amid uncertainty.

The UK is not alone in facing these pressures. Similar PMI data shows activity slowing in both the United States and the eurozone, suggesting the energy shock is having a broad global impact.

Pantheon Macroeconomics estimates that the UK economy may grow by just 0.1 per cent in the first quarter of the year, underscoring the fragile state of the recovery.

The combination of rising costs, slowing demand and tightening financial conditions presents a difficult outlook for the UK economy.

With energy prices driving inflation higher and limiting room for fiscal support, policymakers face a narrowing set of options.

For businesses, the immediate challenge is managing cost pressures without eroding competitiveness. For households, the risk is a renewed squeeze on living standards.

And for the economy as a whole, the latest data suggests a familiar and uncomfortable scenario may be emerging, one where weak growth and rising prices collide.

Read more:
UK factory costs surge at fastest rate since black wednesday amid energy shock

UK inflation remained unchanged at 3% in the year to February, offering a brief period of stability before economists expect a renewed surge in price pressures driven by the Middle East conflict.

Figures from the Office for National Statistics (ONS) show that annual inflation held steady following months of gradual decline, with rising clothing prices offset by lower fuel and alcohol costs.

However, the data was collected before the escalation of the US-Israel conflict with Iran,  an event that has already triggered sharp increases in global energy prices and is widely expected to feed through into higher inflation in the months ahead.

The main upward pressure on inflation in February came from clothing and footwear, where prices rose by 0.9% over the year. This marked a reversal from the previous month, when clothing prices had shown no increase.

ONS chief economist Grant Fitzner said the rise reflected typical seasonal pricing dynamics, but also highlighted the underlying volatility within the inflation basket.

“At the same time, falling petrol costs and discounted alcohol helped offset some of these increases,” he added, noting that alcohol and tobacco inflation reached its lowest level since early 2022.

While fuel costs helped keep inflation in check in February, that trend has already begun to reverse.

The ONS reported that petrol prices were at their lowest level since June 2021 during the data collection period, with average prices around 131.6p per litre. Since then, wholesale oil prices have surged, pushing pump prices significantly higher.

The price of crude oil has risen sharply following disruptions to global supply chains and shipping routes, particularly through the Strait of Hormuz — a key artery for global energy markets.

This shift is expected to have a cascading effect across the economy, increasing costs not only for transport but also for manufacturing, food production and leisure services as businesses pass on higher input costs.

For many companies, the impact is already being felt.

James Palmer, who runs a bus company in Essex, said fuel costs have risen dramatically in recent weeks, creating uncertainty and forcing difficult decisions.

“Three weeks ago we were paying around £1.21 per litre, now it’s closer to £1.86,” he said, highlighting the speed of the increase. Combined with rising wage costs, he warned that price rises for customers are becoming unavoidable.

“It’s the unpredictability that’s worrying,” he added. “We don’t want to let people down, but we may have no choice.”

Economists expect inflation to rise significantly over the course of 2026, with some forecasts suggesting it could peak at around 4.6% if energy prices remain elevated.

This would mark a reversal from the recent trend of easing inflation and could complicate monetary policy decisions for the Bank of England, which had previously been expected to begin cutting interest rates.

Instead, markets are now pricing in the possibility of further rate increases to contain inflation, a move that would place additional pressure on households and businesses.

The inflation data also comes as wage growth shows signs of slowing. Earnings excluding bonuses rose by 3.8% annually,  still ahead of inflation for now, but vulnerable to being overtaken if price growth accelerates.

A renewed squeeze on real incomes could weigh heavily on consumer spending, further slowing economic growth.

Chancellor Rachel Reeves said the government is taking steps to ease the cost of living, including measures to stabilise food prices and improve long-term energy security.

However, economists warn that global factors, particularly energy markets,  may limit the effectiveness of domestic policy interventions.

The February inflation figure represents a moment of calm before what could be another period of turbulence.

With energy prices rising, supply chains under strain and interest rate expectations shifting, the UK economy faces a delicate balancing act,  one where inflation, growth and living standards are all tightly interconnected.

For now, inflation may be stable. But the forces shaping its next move are already in motion.

Read more:
UK inflation holds at 3% ahead of expected post-war price surge