More widely, the geopolitical situation will inevitably loom over market dynamics in 2026. The instability of the past 12 months or more has been stark: nobody expected the events that unfolded in Venezuela at the very beginning of the year.
The potential impact of US foreign policy shouldn’t be underestimated, this may result in tightening trade for UK exporters through tariffs, or more restricted capital flows into UK businesses if an “America First” policy was pursued. It may also have impacts in relation to companies pivoting to trading opportunities within the EU bloc and China.
On a more practical level, there will be new compliance requirements to get grips with in 2026 – namely, changes to accounting standards as both FRS102 and IFRS18 impact company reporting and Pillar 2 tax rules surrounding transfer pricing.
The scale and pace of AI adoption will also throw up further issues for firms to manage. Organisations must ensure employees are using secure AI models, and doing so safely and ethically. Are they writing suitable prompts, and checking the accuracy of the outputs? Are they making sound decisions based on the information they’re getting from AI tools?
Profitability will be under pressure in sectors with narrow margins, such as retail. The costs of employment, compliance, energy and borrowing have all risen in recent years, alongside a heavier tax burden. That limits businesses’ capital deployment options, affecting their decisions on transactions, digital transformation, ESG initiatives and more.
For the South Central area in particular, access to skills is an ongoing problem. Housing affordability in parts of the region can be prohibitive to those in lower-paid jobs, for instance in retail, care provision and basic manufacturing. In addition, infrastructure and transport links are variable across the region.
