Monthly Business Brief 18/08/2025
1. UK Economy Holds Steady with Modest Growth
The UK economy grew by 0.3% in Q2 (April to June 2025), surprising forecasters despite ongoing tax pressures and international trade tensions. The services and construction sectors helped buoy performance, though business investment fell by 4%, reflecting a cautious stance from companies.
Insight: Firms should consider concentrating investment on core strengths such as digital transformation and infrastructure to ensure resilience.
2. Business Confidence at Historic Lows
Confidence among business leaders has slumped, with the Institute of Directors’ Confidence Index falling to –72. Concerns about rising costs, tax hikes and global uncertainty dominate. Recruitment plans are also stalling, with just 57% of employers intending to hire in the next three months, compared to 65% last year.
Insight: For SMEs, the priority may be retention, upskilling staff, and driving efficiency rather than expanding headcount.
3. Retail & Hospitality Under Pressure
The Sleep Haven has gone into administration, the latest in a series of retail failures linked to inflation and reduced consumer demand.
Hobbycraft will close nine more shops by September as it restructures.
Over 100 supermarkets could face closure due to increased business rates on larger sites.
The pub sector continues to struggle, with eight closures per week across the UK.
Insight: Cost control, smaller physical footprints, and omni-channel strategies are becoming critical for survival.
4. Steel Industry at a Crossroads
Liberty Steel’s Speciality Steel UK arm faces collapse, with around 1,500 jobs at risk. In response, the government has passed the Steel Industry (Special Measures) Act 2025, allowing state intervention to safeguard strategically important operations.
Insight: Heavy industries must remain alert to regulatory shifts and embed contingency planning into supply chains.
5. UK Lagging Behind in Robotics & AI
The UK has just 112 industrial robots per 10,000 workers—less than half the EU average. Closing the gap could add up to £150 billion to the economy over the next decade. However, fragmented support for SMEs continues to slow adoption.
Insight: Businesses should explore partnerships, grants and government programmes to accelerate automation, particularly in manufacturing and logistics.
6. Regulatory Updates: Corporate Tax Reporting
Forthcoming changes to corporate tax reporting will require greater transparency, adding administrative pressure on finance teams. This builds on recent moves such as Making Tax Digital.
Insight: Now is the time to invest in digital tax and reporting solutions to stay ahead of compliance demands.
Key Takeaways for UK Business Leaders
UK business leaders face a mix of challenges and opportunities. Uneven growth across sectors highlights the importance of focusing investments on core, resilient areas, while the decline in confidence suggests that businesses should prioritise staff retention and productivity rather than rapid expansion. In retail and hospitality, rethinking site strategies and strengthening the integration of online and offline channels will be critical for survival. Meanwhile, industry volatility requires firms to closely monitor regulation and bolster supply chain resilience. At the same time, the UK’s lag in technology adoption signals a pressing need to explore automation and AI opportunities to remain competitive. Finally, with regulatory demands tightening, businesses must prepare for heavier compliance obligations by investing in robust reporting systems and digital solutions.
Final Thoughts
August highlights the stark contrasts in the UK economy—steady growth in some sectors but deep uncertainty in others. For SMEs, the path forward lies in adaptability, strategic investment, and careful planning.
👉 Are you ready to strengthen your business for the months ahead?
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