Sunday 19 July 2026

Britain ended the business week preparing for another change of prime minister, while companies and households continued to confront higher energy prices, expensive borrowing and uncertainty surrounding the conflict in the Middle East.

Andy Burnham was confirmed as leader of the Labour Party and is expected to replace Sir Keir Starmer as prime minister on Monday. The UK economy returned to modest growth in May, British Steel was brought into public ownership, and Britain agreed a potentially valuable services-focused trade agreement with Switzerland.

Company news was mixed. Burberry reported improving sales in the United States and China, but warned that geopolitical disruption was weakening tourist spending. British engineering company Rotork agreed to a £4.1 billion takeover by ABB, adding to concerns about overseas companies acquiring undervalued businesses listed in London.

The week therefore contained several positive developments, but it also illustrated the difficult economic inheritance facing the incoming government.

Andy Burnham prepares to become prime minister

Andy Burnham was formally confirmed as Labour leader on Friday, completing the final stage before he becomes Britain’s seventh prime minister in a decade.

Burnham has promised to transfer more political and economic power away from Westminster, support regional investment and pursue a more active approach to industrial development. He has also described himself as pro-business, although companies and investors are still waiting for greater detail about his policies on taxation, public spending, energy and employment regulation.

His first Cabinet appointments will be closely watched. The identity of the new chancellor will be particularly important because the government must balance demands for greater public investment with high national debt, expensive government borrowing and limited room within the existing fiscal rules.

The OECD warned during the week that Britain must maintain budgetary discipline while addressing high energy prices, weak productivity and growing spending pressures from pensions and healthcare. It forecast economic growth of 0.9% in 2026 and 1.1% in 2027.

A Resolution Foundation report also highlighted the longer-term challenge facing the new government. It argued that slower economic growth, an ageing population and worsening health outcomes had substantially weakened the public finances, increasing the risk of future tax rises, spending restraint or additional borrowing.

Burnham has already indicated that his government will make some immediate policy changes. Over the weekend, his team confirmed that the national digital identity programme introduced under Starmer would be abandoned, with resources redirected towards cost-of-living priorities. The Office for Budget Responsibility had previously estimated that the programme could cost approximately £1.8 billion between 2026–27 and 2028–29.

The early decisions will help establish whether the change of leadership represents a significant change in economic direction or a different presentation of broadly similar policies.

UK economy returns to modest growth

Official figures provided some encouragement after showing that the UK economy grew by 0.1% in May.

Services output increased by 0.3%, but industrial production declined by 0.5% and construction fell by 0.8%. Across the three months to May, the economy expanded by 0.7%, while output was 1.3% higher than a year earlier.

The figures suggest that Britain avoided a more prolonged period of contraction following the 0.1% fall recorded in April. However, the sectoral breakdown again demonstrated the economy’s dependence on services.

Manufacturing and construction continue to face particular pressures from high energy costs, increased employment expenses, weak demand and expensive finance. Business surveys have also suggested that many companies are delaying recruitment and investment while they assess the effect of the Middle East conflict on inflation and consumer spending.

For the incoming government, the challenge will be to turn relatively strong short-term growth across the three-month period into sustained improvements in investment, productivity and household living standards.

Economic growth of 0.1% in a single month is better than contraction, but it remains too weak to generate a rapid improvement in the public finances or business confidence.

British Steel brought into public ownership

One of the week’s most significant industrial developments was the formal nationalisation of British Steel.

The government took full ownership of the loss-making company from China’s Jingye Group after failing to find an acceptable private-sector buyer. Ministers said the decision was necessary to protect the UK’s remaining primary steelmaking capacity and prevent the closure of the Scunthorpe plant.

The site directly supports approximately 2,700 jobs, with thousands more dependent upon its supply chain. It produces steel used by the rail, construction and automotive industries.

The government had already taken operational control of the business in April 2025. Since then, approximately £640 million of public money has reportedly been committed to keeping the plant operating, with ongoing support costing more than £1 million a day.

Nationalisation removes the immediate threat to the Scunthorpe blast furnaces, but it does not resolve British Steel’s underlying commercial problems. The business continues to face high electricity costs, international competition and excess steelmaking capacity across the global market.

The long-term objective will be to modernise production while reducing the company’s dependence on continuing public subsidy. That could require substantial investment in lower-carbon steelmaking technology, energy infrastructure and more efficient production methods.

China strongly criticised the takeover, arguing that Jingye’s interests had been damaged and warning that the decision could affect Chinese companies’ confidence in investing in Britain. By Sunday, Jingye had begun seeking compensation and indicated that it could pursue international arbitration if an agreement was not reached.

The dispute creates a difficult diplomatic balance. Britain wants to protect strategically important domestic industries while continuing to attract international investment into manufacturing, infrastructure and energy.

Energy prices place further pressure on businesses

Energy costs remained one of the most important influences on the economy during the week.

Renewed confrontation between the United States and Iran pushed oil prices higher and increased concern about disruption to shipping routes and energy supplies. Rising oil and gas prices feed into transport, manufacturing, food production and household bills.

Business groups urged the incoming prime minister to reduce taxes and levies applied to commercial electricity bills. The Confederation of British Industry and Energy UK said that around 40% of firms were cutting investment because of high energy costs and estimated that British electricity prices were approximately 45% above the median across G7 economies.

Reducing commercial energy costs could strengthen the competitiveness of manufacturers and other energy-intensive businesses. However, removing levies would require the government either to identify replacement revenue or fund environmental and social policies through general taxation.

The debate is particularly relevant to British Steel. Protecting domestic manufacturing through nationalisation will have limited long-term value unless the government also addresses the structural cost disadvantages faced by British industry.

Energy policy is therefore likely to become one of the earliest tests of the Burnham administration.

Mortgage rates begin rising again

The international energy shock also reached the UK mortgage market.

Several major lenders, including Barclays, NatWest, Nationwide, Coventry Building Society and Virgin Money, increased fixed mortgage rates during the week. Some products rose by as much as 0.35 percentage points as lenders responded to higher wholesale funding costs.

Two-year swap rates, which influence the pricing of fixed mortgages, increased from approximately 3.95% to 4.22% over a period of several weeks. One Nationwide two-year mortgage reportedly increased from 4.24% to 4.59%.

For households refinancing their mortgages, relatively small changes in interest rates can produce noticeable increases in monthly payments. That reduces the amount available for discretionary spending and may affect retailers, restaurants, leisure businesses and other consumer-facing sectors.

Higher mortgage costs could also weaken demand for property and new housing. Housebuilders and estate agents will therefore be watching both inflation and the Bank of England’s next interest-rate decision closely.

Bank Rate remains at 3.75%, with the next Monetary Policy Committee announcement scheduled for 30 July.

Switzerland trade agreement strengthens services links

A new trade agreement between the UK and Switzerland provided one of the week’s more positive developments.

The agreement is primarily intended to support services, digital trade and the movement of professional staff. Eligible workers in sectors such as finance and professional services will be able to travel visa-free for up to 90 days each year.

British businesses will also be able to transfer employees to Swiss offices for up to five years without having to pass certain economic tests. The agreement includes provisions covering intellectual property, mobile roaming and the future use of Swiss airport electronic gates by British passport holders.

The UK government estimates that the agreement could eventually increase British exports by £5.2 billion a year. The remaining legal work is expected to be completed before the agreement is formally signed.

Switzerland is an important market for financial services, pharmaceuticals and specialist manufacturing. The agreement also demonstrates the potential value of trade deals which address services and professional mobility rather than concentrating mainly on tariffs applied to physical goods.

City sets out plans for tokenised financial markets

The City of London also published plans to expand the use of tokenisation across wholesale financial markets.

Tokenisation involves recording ownership of assets such as bonds, funds and collateral through digital systems. Supporters argue that the technology could reduce transaction costs, improve liquidity and make parts of the financial system more efficient.

The programme will initially involve 54 financial and technology companies, including major banks, investment managers, exchanges and digital-asset businesses. Areas under consideration include tokenised collateral, funds, payment systems and the government’s planned digital gilt instrument.

A report presented to the chancellor estimated that tokenisation could eventually add up to £33 billion to annual UK economic output by 2035, although achieving this would require regulatory certainty, technical interoperability and commercially successful live markets.

The initiative reflects growing competition between international financial centres to develop the infrastructure for digital securities and wholesale payments.

Burberry’s turnaround shows further progress

Burberry reported a 5% increase in comparable store sales during its first financial quarter, with revenue rising from £433 million to £455 million.

Sales increased by 12% in the Americas and 9% in China. The company said that new customers and stronger demand from Generation Z shoppers were supporting its recovery strategy.

However, sales across Europe and the Middle East declined by 3%. Burberry said the conflict in the Middle East was affecting international tourism, reducing spending in locations including Dubai and some European shopping destinations.

Chief executive Joshua Schulman also renewed calls for the government to restore tax-free shopping for overseas visitors. Burberry estimates that its tourist business in London has declined substantially since the VAT refund scheme was abolished, while visitor spending has shifted towards competing cities such as Paris.

The sales figures suggest that Burberry’s attempt to refocus on its established British identity, outerwear and core products is working. Nevertheless, the company remains exposed to tourism, Chinese consumer confidence and wider conditions in the international luxury market.

Rotork takeover renews concerns about the London market

Swiss engineering group ABB agreed to acquire British industrial automation company Rotork in a deal valued at approximately £4.1 billion.

Rotork produces equipment used to control the flow of liquids and gases across industries including water, energy, chemicals and manufacturing. ABB described the transaction as its largest-ever acquisition and indicated that it still had substantial resources available for further deals.

The takeover represents a strong return for Rotork shareholders, who were offered a substantial premium over the company’s previous market value.

However, the transaction has renewed debate about the condition of the London stock market. A growing number of established British companies have been acquired by overseas buyers, while the number of significant new listings has remained limited.

Foreign ownership is not automatically harmful. International buyers can provide capital, technology and access to larger markets. Nevertheless, repeated takeovers raise questions about whether British companies are being undervalued and whether strategic decisions, corporate headquarters and future investment will increasingly move abroad.

Restoring confidence in London as a place to list, finance and grow companies is likely to remain an important priority for the new government.

Technology shares end the week under pressure

Global technology and semiconductor shares fell sharply towards the end of the week as investors questioned whether the scale of spending on artificial intelligence infrastructure could be justified by future profits.

The Nasdaq lost approximately 2.9% over the week, while the S&P 500 declined by around 1.6%. Semiconductor shares were among the weakest areas of the market.

The UK stock market contains fewer major technology companies than the United States, but global technology valuations still affect British investors, pension funds and growth companies seeking finance.

The sell-off does not necessarily indicate the end of the artificial intelligence investment cycle. However, it shows that investors are becoming more demanding about capital expenditure, revenue growth and the time required to produce returns.

A mixed week for UK business

The week’s developments presented a complicated picture.

The economy returned to growth, Burberry reported improving sales and the Switzerland trade agreement could support financial and professional services. Plans to expand tokenised markets also show that Britain continues to seek new areas of financial innovation.

Against these positive developments, higher energy and mortgage costs threaten household spending and business investment. British Steel will require a credible commercial strategy, while the Rotork takeover has added to concern about the loss of established companies from the London market.

The change of prime minister adds a further layer of uncertainty. Burnham has promised regional investment, reindustrialisation and a more decentralised economy, but the financial limits facing the government remain severe.

The reaction of gilt, currency and equity markets to his Cabinet appointments and early policy announcements will provide an important indication of whether businesses believe political change will strengthen the economy.

What to watch in the business week ahead

Burnham enters Downing Street

Andy Burnham is expected to become prime minister on Monday 20 July and announce the main members of his Cabinet.

Businesses will be watching the appointments to the Treasury, Department for Business and Trade, and Department for Energy Security and Net Zero. Early statements on fiscal rules, taxation, industrial policy and energy costs could affect sterling and government bond markets.

The decision to abandon the digital identity scheme may be followed by further changes to policies inherited from the Starmer government.

Labour-market and public-finance figures

The Office for National Statistics will publish its latest labour-market figures on Tuesday 21 July. The release will cover employment, unemployment, economic inactivity, vacancies and average earnings.

Public-sector borrowing figures for June will also be released on Tuesday. These will be particularly significant because they will provide an early indication of the financial position inherited by the incoming chancellor.

Weak tax receipts or higher-than-expected borrowing would reduce the government’s ability to introduce new spending commitments without raising taxes or changing its fiscal rules.

Inflation and producer prices

Consumer and producer price figures for June will be published on Wednesday 22 July.

CPI inflation was 2.8% in May, while the broader CPIH measure was 3.0%. Services inflation remained more persistent, with CPI services prices rising by 3.7% over the year.

The June figures will begin to reveal how renewed increases in energy and transport costs are affecting the wider economy. Producer prices will be particularly important for manufacturers and retailers because they provide an indication of cost pressures moving through supply chains.

Private rent and house-price figures will also be published later on Wednesday.

Farnborough International Airshow

The Farnborough International Airshow takes place from Monday 20 July to Friday 24 July.

The event brings together aerospace, aviation, defence and technology businesses from around the world. Commercial aircraft orders, defence contracts and supply-chain investment announcements could be significant for British manufacturers, including companies connected to Airbus, Rolls-Royce and the wider aerospace sector.

Defence technology is expected to receive greater attention this year because of higher military spending and continuing conflicts in Ukraine and the Middle East.

easyJet results

EasyJet will publish its third-quarter results on Thursday 23 July.

Investors will examine summer bookings, ticket prices, fuel costs and the effect of international disruption. The results will also be considered alongside competing takeover interest in the airline, including Apollo’s £5.7 billion proposal.

Strong trading could encourage shareholders to demand a higher price, while weaker guidance could strengthen the case for accepting an existing offer.

European Central Bank decision

The European Central Bank will announce its latest interest-rate decision on Thursday.

Economists surveyed by Reuters unanimously expected the ECB to leave its deposit rate unchanged at 2.25%, although many anticipate a further increase later in the year if higher energy costs continue to affect inflation.

The decision matters to British companies because the European Union remains the UK’s largest trading partner. Higher eurozone borrowing costs could weaken demand while affecting currency and bond markets.

Retail-sales figures

Official retail-sales data for June will be published on Friday 24 July.

The figures will show whether household spending has remained resilient despite rising mortgage rates, expensive energy and political uncertainty.

A weak result would add to concerns about the outlook for retailers and other consumer-facing businesses. Stronger sales would suggest that household demand is continuing to support the economy.

Technology earnings and the AI market

Results from Alphabet, Intel and other major US technology companies will be watched closely following the sharp fall in semiconductor shares.

Investors will focus on artificial intelligence spending, data-centre investment and evidence that technology companies are converting large capital commitments into revenue and profit.

Because US technology companies represent a substantial part of global equity markets, their results could influence UK pensions, investment funds and general market confidence.

Energy and geopolitical risk

The largest risk to the economic outlook remains the conflict in the Middle East.

Further attacks on energy infrastructure or shipping routes could push oil and gas prices higher, increasing inflation and borrowing costs. Progress towards a ceasefire could have the opposite effect, providing relief to households, businesses and central banks.

Scheduled economic data will shape the week, but geopolitical developments may ultimately have the greatest influence on markets.

Photo by Eduard Pretsi on Unsplash