Closing post
Time to wrap up…
Rachel Reeves has announced that the Treasury will draw up proposals to hand England’s mayors a share of national tax revenues as part of a radical plan to rebalance the economy.
The chancellor promised “a genuine break with the past” that would shift spending power away from Westminster, as she promised to create investment-led growth, across the UK.
Reeves was delivering the Mais lecture – the second time she has given the high-profile annual address at Bayes Business School in London.
It is no coincidence that the UK is “the most politically centralised of advanced democracies, and one of the most geographically unequal”, Reeves said.
Treasury officials will bring forward a plan at the autumn budget to allow regional leaders to receive a share of national taxes, starting with income tax, she added.
Reeves also announced new city investment funds worth £2.3bn for England’s regional “metro” mayors to spend on long-term investment projects, adding that they would be able to retain future business rates revenue.
More here:
Reeves plans to give England’s regional leaders a share of national tax revenues
During a wide-ranging speech, the chancellor also argued that innovation and AI, closer ties with Europe, and regional growth provided the biggest opportunities for growth in the UK.
Reeeves announced the creation of an AI Economic Institute to help identify opportunities, saying the government wanted the British people to benefit from them.
And on closer alignment with Europe, she explained:
Let me say this directly to our friends and allies in Europe. This government believes a deeper relationship is in the interest of the whole of Europe.
She also cited research that Brexit could have knocked up to 8% off UK GDP, saying it had caused damage.
The chancellor also agreed that the student loan system was broken, but argued she couldn’t fix it yet and that it was right to prioritise child poverty, the NHS and defence.
Goodnight. GW
Updated
To deliver on Rachel Reeves’s artificial intelligence ambition, the UK needs a workforce that is not just aware of AI but equipped with the skills to use it effectively, argues David Shepherd, senior vice president of the EMEA region at UK software firm Ivanti,
Shepherd explains:
Building these capabilities requires continuous public sector support and accessible resources, alongside a renewed focus on widespread upskilling and AI literacy programmes.
And by investing in comprehensive AI education now, we ensure that when employees encounter AI in their roles, they’re not just familiar, they’re empowered to leverage it confidently and productively.
Not only does this enhance individual career opportunities, but it enables organisations to adopt and scale AI more effectively. In turn, that strengthens the wider UK business ecosystem, boosting productivity, competitiveness and long-term economic growth.
While the government’s enthusiasm for AI is clear, the reality is lagging behind.
A Guardian investigation earlier this month found that the multibillion-pound drive to “mainline AI into the veins” of the British economy is riddled with “phantom investments” and shaky accounting.
While many massive deals to build new datacentres and create thousands of jobs have been trumpeted in recent years, progress on the ground has been slow. More here:
TUC: UK must press on with improving relations with Europe
The TUC is urging the government to show “relentless ambition” in strengthening the UK’s relationship with the EU, as Rachel Reeves pledged to do today.
TUC General Secretary Paul Nowak said:
“The Conservatives’ botched Brexit deal left our economy poorer, put jobs at risk and set workers and businesses back.
“A closer relationship with the EU could cut the cost of essentials, and be a boon for British jobs and manufacturing. The Chancellor is right to put this at the heart of her plan for growth.
“The Government should have relentless ambition. Alignment on key sectors is common sense – starting with chemicals, pharmaceuticals and automotive where there are the biggest gains to be made.
“With such a volatile and unpredictable President in the While House, it’s never been a more important time to strengthen ties with our biggest trading partner.”
Rachel Reeves’s pledge to support regional growth today is being welcomed.
Anna Leach, chief economist at the Institute of Directors, said:
“The Chancellor’s focus on driving up productivity and investment are the right ones. Enhancing growth resilience is ever more vital as the UK continues to be buffeted by shocks. Reinforcing the UK’s trade connections, maximising opportunities across regions and gripping the AI opportunity are sensible priorities. And doing so hand-in-hand with business will help shape policies that will work in practice.
It is good to see policy consistency coming through, for example through policies to deliver Oxford-Cambridge and Northern growth corridors. And there’s a welcome reference to the role regulation can play in inhibiting investment by businesses – this regularly appears in the top four factors negatively affecting investment amongst business leaders.
Rosalind Gill, director of policy, analysis and external affairs at the National Centre for Universities and Business (NCUB), welcomed the chancellor’s ‘more interventionist’ approach, saying:
“The Chancellor is right to focus on stability, investment and reform as the foundations for long-term growth. Commitments to the Oxford Cambridge corridor, alongside plans to expand Luton Airport and invest in regional water infrastructure, reflect a more interventionist approach to unlocking growth.
At the same time, measures to accelerate delivery, including potential use of compulsory purchase, underline the government’s intent to move quickly.”
Richard Partington: Problems and opportunities in fiscal devolution
Reeves’s plans to devolve tax and spending powers to regional mayors, including through “looking at income tax” at the Autumn Budget, have been thrown around before many times in British politics. Yet few chancellors have made meaningful changes, my colleague Richard Partington writes.
From the Poplar Rates Rebellion of 1921, to the 1990 Poll Tax riots, Westminster has run into trouble when reforming local financial powers. Back in the 1970s, the government-backed Layfield report called for the introduction of local income tax that would give councils control of several pennies in the pound. But it was never implemented.
Tackling regional divisions are complex. Given the unequal nature of wealth and income distribution across the country - turbocharged in recent decades by London pulling ahead from the rest of the UK - tweaking regional policy can create winners and losers.
Granting full autonomy to vary local income tax and retention would enhance incentives for mayors to boost their local economy. But a full-fat approach could hand vastly more cash to the areas with the most high-earners - typically in London and the South East.
Official figures show London and the South East are the only UK regions with a net fiscal surplus. All other places spend more than they receive in tax income.
As a result the design of any devolution package would be hugely important, to avoid entrenching inequalities.
There are however big reasons to push ahead. Britain is among the most regionally unequal countries in Europe, and could do with more high-performing cities and towns to drive up the country’s economy at large. Economists argue devolution could be part of the mix to boost incentives and local financial firepower.
Analysis by the Centre for Cities shows only 5% of the UK’s tax revenues in 2019 were collected by local government - compared to 14% in France, 23% in Japan and 35% in Sweden. Meanwhile, the Mayor of New York City controls property taxes, a sales tax, and an income tax, which together bring in over $60bn. According to the Centre for British Progress, mayors in England control little more than £5bn.
Today’s announcement from Rachel Reeves about fiscal devolution feels like “a turning point”, says Councillor John Merry, Chair of Key Cities and Deputy Mayor of Salford,
The Chancellor’s plan directly answers a long‑standing frustration from cities that they are expected to drive economic growth without the fiscal tools to make it happen.
For years, the Key Cities network has argued that local leaders understand their economies better than central government and are best placed to decide how tax revenue should be invested, whether by improving transport, boosting skills, building homes or reviving our high streets. By committing to give regional leaders a share of national taxes, including income tax, the government is explicitly acknowledging that local growth depends on local control.
The promise that this will be a permanent, fiscally neutral transfer of power marks a real break with that past and gives people confidence that money raised in their area will be used to improve their area. Key Cities is ready to help shape this roadmap and to work alongside mayors and ministers to make sure it delivers the meaningful and practical solutions our cities need on the ground.”
BCC: Businesses want to see bolder approach on EU relations
The three key priorities in the Chancellor’s Mais lecture will resonate with many businesses as they fight to get on the front foot, says Shevaun Haviland, Director General of the BCC.
“Investing in our regional economies, promoting AI and improving our trading relationship with the EU are vital steps on the pathway to higher growth.
“Firms want to see a bolder approach from Government on cutting trade barriers and improving defence cooperation with Europe. It remains our largest trade partner and a pragmatic approach to improving that relationship can offer some much-needed stability amid an ocean of geopolitical turbulence.
“The ambition to make the UK the fastest AI adopter in the G7 should also be applauded. We are in a global race to secure the benefits of this game changing technology which can give UK businesses a vital edge in an increasingly competitive global market.
Increasing support for the Oxford-Cambridge and Northern Growth Corridors shows the chancellor understands the need to back winners, Haviland adds.
IPPR North: Fiscal devolution could help rebalance UK
Reaction to Rachel Reeves’s Mais lecture is starting to roll in.
Mirte Boot, Principal Research Fellow and Interim Head of IPPR North says the chancellor’s plans for ‘fiscal devolution’ could help rebalance the economy.
“The UK is still one of the most regionally unequal places in Europe, with jobs and opportunity concentrated in places like London, Oxford and Cambridge. A young person growing up in the North shouldn’t have to look down South to imagine success.
“So, the Chancellor’s announcement, promising £1.7bn to city-regions across the north, is a very welcome shift towards rebalancing the economy.
“But this investment package must also work hand in hand with the visitor levy and further devolution, to hand local leaders the powers to make the North rival the South.”
Why Rachel Reeves won't fix 'broken' student loan system now
Rachel Reeves and her team from the Treasury have now vacated the Bayes Business School lecture theatre (after an amusing vote of thanks from Professor Sir Anthony Finkelstein, President, City St George’s, University of London).
So I’ve listened back to the part of the chancellor’s Q&A where she explained why she won’t, yet, fix the student loan system.
Touching on the state of the UK public finance, she said:
“Yes, the student loan system is broken. But if you try to fix everything straight away, everything will fall over.”
“We have precarious public finances, and that has also been thrown into stark relief in the last few weeks since the conflict in the Middle East erupted.”
“We are reintroducing the maintenance grant for the poorest students going to university.”
We are also investing heavily in further education and apprenticeship, because the majority of young people don’t go to university,
[The chancellor then pointed out that the people who aren’t in education, employment or training don’t tend to be the graduates, they tend to be the kids who didn’t go to university].
Pleading for patience, Reeves says:
“So yes the student loan system is broken, but what is more broken is the fact that we have got one in six kids not in education, employment or training.”
“So yes we want to fix it, yes we want to make improvements. But is it front of the queue? No, it’s not.”
“Because we’ve got to get those hospital waiting lists down. We’ve got to lift kids out of poverty so they get the chance in the first place,and we’ve got to uplift our defence spending.”
“Politics is about priorities. I’m not denying there’s a problem. I’m not blind to that.
“But what I do say is there has to be some patience, you can’t fix everything straight away.
Reeves concluded by insisting that she “strongly” disagreed with anyone who suggested she should have reformed the student loan system rather than tackling child poverty (through ending the two child benefit cap).
Reeves: Closer alignment with Europe will benefit UK
Nearly 90 minutes after beginning her lecture, Rachel Reeves wraps up by answering another question about Europe – and repeating that closer alignment can bring benefits.
She repeats her earlier warning that some economists estimate the hit to the UK economy from Brexit could be around 8% of GDP.
[I’m not sure at all, but the chancellor could be referring to recent research from the CEPR, here].
Thus, making trade and investment easier between the UK and European Union countries can begin the process of bringing some of that loss back.
Ultimately, that will be felt in people’s pockets and in their living standards, she concludes.
Updated
Reeves: be 'very careful' of temptation to change fiscal rules
Q: Following the oil price shock, do you stand by your view that the UK has done enough to avoid the need for any further tax increases, and can withstand further shocks without need for further fiscal action?
Reeves says the UK’s public finances are improving, pointing to a drop in the budget deficit as a share of GDP, and forecasts that it will faster than other G7 countries.
And she fires a warning shot across the bows of anyone who things “this is the moment to change course.”
Standing by her fiscal rules (to bring down the national debt and only borrow to invest)
The chancellor warns:
I just say to them, be very careful about what you are doing and what you are advocating.
We are in a stronger position now because of the fiscal rules.
Updated
Q: On Europe, do the red lines that Labour has set out still fully apply?
Reeves indicates they do.
We will not be rejoining the single market, the customs union or rejoining the free movement of people, she insists.
Reeves: Student loan system is broken, but can't be fixed yet
Onto questions, and Rachel Reeves is challenged about the crisis in the student loan system.
Q: Yesterday, the chancellor of the University of Cambridge said the student loan system is broken. What are you going to do to fix it?
Reeves acknowledges that the student loan system is “broken”.
However, she’s not planning to fix it imminently, arguing this isn’t possible.
The chancellor says the “precarious public finances” mean the government can’t fix everything straight away.
She points out that the government is reintroducing maintenance grants for poorer students going to universities.
And she argues that what is “more broken” is the large number of young people who are are not in education or training.
Reeves points out that the majority of kids she went to school with didn’t go to university.
So while fixing student loans is important, it’s not at the front of the queue.
Reeves says:
I’m not denying that there’s a problem. I’m not blind to that.
But, she adds, there has to be “some patience”, as the government can’t fix everything immediately.
Updated
Reeves: I'm still optimistic
Reeves rounds up this year’s Mais lecture by insisting she is still optimistic, despite everything that’s occured in the last two years.
She tells the Bayes Business School lecture theatre:
Two years ago in this lecture hall, I said that despite the challenges, I was an optimist about our ability to face them. And despite further challenges that have come our way, I remain an optimist.
And returning to her key theme, the chancellor says that means optimism about “the capacity of an active and strategic state” to drive investment and growth.
She is also optimistic about the dynamism and the enterprise of British business, and the “talent, commitment and ingenuity of working people in every part of our United Kingdom.”
Cue a warm round of applause.
Reeves: deeper relationship would benefit the whole of Europe
Rachel Reeves then pins her colours to the mast of closer alignment with Europe, saying:
Let me say this directly to our friends and allies in Europe. This government believes a deeper relationship is in the interest of the whole of Europe.
The chancellor then argues that future UK prosperity will be built through partnerships, with those who share our interests, values and ambitions.
No partnership is more important than that between the UK and our European neighbours, she insists.
On Brexit damage
Brexit “did damage”, Rachel Reeves then tells the audience at today’s Mais lecture.
She says there is evidence that the GDP impact could be as much as 8%.
That has meant higher costs for businesses, and thus higher costs in the shops.
The chancellor says the government doesn’t want to turn back the clock, but to create a new and stable future relationship.
That means that when it is in our national interest to align with EU regulations, we should be prepared to do such, she suggests.
And that decision must be based on several principles:
First, alignment should mean higher growth and investment, more jobs and consumer benefits for the long term.
Second, the future direction of policy should be sufficiently stable, and compatible with UK values and objectives.
Thirdly, the UK’s economic and national security resilience should be preserved or enhanced when those principles.
Onto geopolitics, and Rachel Reeves says the government wil look carefully at any option to allow the UK to participate in the EU’s efforts to make a 90 billion euro loan to Ukraine.
Reeves announces AI economic institute
Onto artificial intelligence, where Reeves confirms the UK wants to have the fastest take-up in the G7.
She says AI has the potential to transform productivity across the entire economy, and reveals she will hold an AI adoption summit later this year.
She argues that AI entrepeneurs should “come to the UK”, as the country will provide support to get projects off the ground.
She acknowledges the concerns people have about AI, before arguing that the government must ensure that the British people canshare in the prosperity it can create.
That means equipping them with the skills they’ll need.
Reeves also announces the creation of an “AI economics institute”, to track impact on economy and labour markets, and make sure people don’t lose out.
Reeves asks officials to draw up plans for fiscal devolution
Boom! Rachel Reeves then tells her audience that she has asked the Treasury to work with mayors and businesses to develop a roadmap for future fiscal devolution.
This plan will be published at this year’s budget.
It will set out plans to give regional leaders control of a share of some national taxes – which Reeves points out have long been allocated by central governments. It could include income tax, she suggests.
The chancellor says these reforms will begin with places which have the greatest capacity to deliver them and the greatest potential to benefit.
She insists that it is “not about new taxes, and it’s not about higher tax”, promising “I will not ask taxpayers to pay more”.
These reforms will be fiscally neutral, focused on sharing and retaining a portion of existing revenues with the places that generated them, she says.
Reeves promises:
These reforms will represent a permanent transfer of power and resources, not another exercise in local ambition.
Taxpayers will be able to see what is being delivered with their money and hold local leaders to account for the results, she insists.
She calls it “a genuine break with the past”, calling it:
A generational opportunity for Britain’s regions to make their own future.
Updated
As reported earlier this morning, Reeves then announces a new push on the Oxford-Cambridge corridor.
That will mean new investment in reservoirs in Oxfordshire and Cambridgeshire, expansionfor Luton airport, and more funding for transport in Oxford, housing in Cambridge and in a new Cambridge innovation hub.
Reeves announces the government will consult on a Development Corporation, and provide more funding to build infrastructure and acquire land to support these cities to grow.
Reeves says she wants these deals done quickly, but when landowners are intransigent or insist on unreasonable demands, the government is ready to acquire land using compulsory purchases.
“I want brilliant, dedicated people in Whitefield and Rochdale and Barnsley to succeed,” Reeves declares, as she outlines how people shouldn’t have to uproot themselves to find a good job.
There is no reason why they cannot live close to home, she argues, if the government can invest in transport infrastructure.
Steel strategy coming on Thursday
“A few cities shouldn’t have the monopoly on good work,” Rachel Reeves declares, as she outlines the government’s efforts to support growth around the UK – including support for shipbuilding in Belfast, coal manufacturing in the West Midlands and steel at Port Talbot and in Scotland.
She then reveal that the business secretary will publish the government’s steel strategy on Thursday.
Reeves touches on the increased public spending in her budgets, saying the UK is beginning to see the results.
NHS waiting lists are the lowest level in three years, she says, more free childcare is available, and the two child limit will soon be gone for good.
That will lift almost half a million children out of poverty, the chancellor says, adding (channeling New Labour of the past):
Much done. Much more to do.
Reeves: Youth unemployment is far too high
Onto jobs; Reeves says the government’s Employment Rights Act is about dignity, security and providing fairness for working people.
She talks about the need to train and retrain people, so that “work should always pay.”
But she also points out that joblessness among young people is much too high, saying:
Youth unemployment of over 16% is far too high, and we will not leave a generation to languish without prospects.
Rachel Reeves says she believes in an “active and strategic state”, whichshould be guided by three priorities – stability, investments, and reform.
Stability is a basic precondition, she argues, for secure family finances, business confidence and business investment.
Reeves says her changes to the fiscal rules have unlocked more than £120bn over the course of this Parliament for investment around the country.
And on reform, she talks about the need for a new attitude to regulation. Although the chancellor insists she doesn’t believe in deregulation as an ideology, she favours innovation, rationalisation and “levelling the playing field”.
Reeves condemns the austerity brought in after the financial crisis for choking off demand just where “historically low interest rates offered a priceless opportunity to invest”.
Onto Brexit, which she says created profound uncertainty, raised new barriers for trade and leaves some facing and additional danger today.
There is now a risk that the UK finds itself stranded between powerful trading blocs, she says.
And she roasts Liz Truss’s 2022 mini-budget, calling it a “final, doomed, fanatical attempt at taking a sugar rush out of a broken economic model.”
Reeves: Swift resolution to Middle East is best way to keep energy bills down
On Iran, Reeves says the UK is working with partners to secure oil and gas and liquefied natural gas transit through the Strait of Hormuz.
Reeves then adds:
And it remains the the single best way to protect families and businesses from rising energy prices is a swift resolution to the conflict in the Middle East.
On energy, Reeves says we are starting to see the results of the government’s actions, saying the UK imported 17% less gas in 2025 than in 2021.
She also argues that the country was in a better state on the eve of the Iran war than it was before the Ukraine war began in 2022, as inflation is lower, and the UK has lower borrowing than the G7 average.
Onto defence, and Reeves hails a new partnership between the UK and the Netherlands, Finland and other EU and NATO partners, to collaborate on defense financing and procurement.
Rachel Reeves then outlines how the government’s strategy will restore the “delicate balance” between flexibility and security of working people.
That means having strong supply chains, while also taking an interest in “where things are made and who makes them”, she says.
Reeves: Globalisation as we once knew it is dead.
Reeves turns to the global context, with the war in Iran raging.
She cites recent crisis, from the 2008 financial crisis, the Covid pandemic, the Ukraine war and now conflict in the Middle East.
The chancellor says:
These crises affirm the reality, that globalization as we once knew it, is dead.
Each crisis has reminded us that we are an interconnected world, she continues.. meaning the “easy optimism about economic integration” has faded, as shocks have rippled across global supply chains.
Reeves then calls for “a break with the past” and ending the “laissez faire politics of the passive state”.
Reeves: This is an anxious moment
After a welcome from Professor André Spicer, Dean of the Bayes Business School, Rachel Reeves takes the stage to deliver this year’s Mais lecture.
Spicer reminds us that Reeves’s commitment to the job included spending Valentine’s Day watching Newsnight special about the lessons from the Swedish banking crisis.
(what could be more romantic?!)
The chancellor begins by saying she knows this is an “anxious moment” for people.
Reeves says:
People aren’t asking for the world, just a chance to build a good life, to choose how and where they wish to live, in a place where they can feel safe and proud of their neighbourhood.
They want to earn well, afford a decent home, and sleep without worrying about the next bill.
That is the promise that democratic capitalism has relied on, she says, but for too many people it hasn’t delivered for a while.
Then she speaks about the important of productivity-driven growth.
Today’s lecture will be about “The active and strategic state”, the screen in the lecture hall here suggests.
There’s a big team from the Treasury here to support Rachel Reeves, including Torsten Bell, Dan Tomlinson, Lord Livermore and Lucy Rigby.
Reeves to give Mais lecture shortly
Here at the Bayes Business School in the City of London, Rachel Reeves is about to deliver the annual Mais Lecture, with a big focus on Europe, AI and regional growth expected.
The Mais lecture is a City institution, having been established in 1978 to honour Lord Mais, a former Lord Mayor of the City of London.
The Mais lecture is typically given by a leading politician, central banker or economist, to an audience of senior City figures, academics, alumni, students and the media.
Over the years, Sir Geoffrey Howe has spoken about “The Fight Against Inflation” in 1981, Tony Blair outlined “The Economic Framework for New Labour” in 1995, Bank of England governor Eddie George presented on “Monetary Policy in Britain and Europe” in 1997, and French president Valery Giscard d’Estaing disucssed “The New European Debate: The Eurozone and the Greater Europe” in 2001.
Reeves is the first person to give two Mais lectures, having been here in 2024 too.
Updated
Over at Bayes Business School in the City of London, guests are arriving for Rachel Reeves’s Mais lecture, due to start in 45 minutes.
They’re mingling over sushi, pastries, sliced meat, fruit and cheese.
MPs ask Lloyds how customers saw other users' data
Parliament’s Treasury Committee are demanding answers from Lloyds Banking Group about the IT glitch which allowed some customers of Lloyds, Halifax and Bank of Scotland to see other users’ transactions.
Dame Meg Hillier, chair of the Committee says the incident appears to be an ‘alarming breach of confidentiality’ (indeed!) and is seeking further clarity on what happened.
In a letter to Lloyds, Dame Meg wants to know how many cutomers were affected by last week’s incident, what information was revealed, and what compensation will be paid.
She asks:
Please can you provide the Committee with an overview of the incident, including the channels (e.g. app, internet banking) and brands that were affected by this incident. This should include a timeline of your response;
A description of the information that has been incorrectly presented to people other than the correct account holder, including whether it was limited to just information about transactions or whether other personal information, including National Insurance numbers, was released;
Whether it is possible to identify those whose information has been incorrectly passed on to others, and if so, how you will communicate with those customers;
The number of customers that have been affected by the incident. This should be separated into the number of people who saw other people’s information, and the number of people whose information was erroneously provided to others, if possible;
What steps you are taking to encourage those who may have taken copies of data to which they were not entitled to delete it;
The amount of compensation that Lloyds Banking Group has so far paid related to this incident and to how many people, and whether Lloyds Banking Group will be proactive in providing compensation to those who may at present not know they have been a victim of this data breach;
When Lloyds Banking Group first informed the Financial Conduct Authority and the Information Commissioner about this breach;
Your initial explanation of the reason for this failure of data protection.
Dr Eleanor Crane, assistant professor in Quantum Computing at King’s College London, has welcomed the government’s pledge of £2.5bn for AI and quantum technologies, saying:
“This investment will provide an incredible boost to quantum research, and will enable the UK to keep its longstanding role at the forefront of quantum computing.”
But…. challenges need to be overcome to drive quantum computing in the UK, Dr Crane adds:
“The challenges which need to be overcome to drive quantum computing in the UK are: creating attractive positions for lecturer and professor level positions in quantum computing for internationally renowned scientists (further to the existing positions in quantum sensing and communications), and finding ways to enable widespread collaboration with leading European countries in quantum who have an aligned vision of the future such as France, Germany, Spain, Finland and Austria.”
Here’s the chancellor’s message on AI:
This government will make the UK the best place in the world for quantum and AI companies to start, scale and stay.
— Rachel Reeves (@RachelReevesMP) March 17, 2026
In a changing world, our economic plan is the right one.https://t.co/CnW6Kw7sA1
Many medium-sized UK firms have already turned to AI, new research shows.
AI adoption among mid-sized firms has jumped from 35% to 55% over the last two years, a survey conducted by the Centre for Economics and Business Research (Cebr) on behalf of HSBC UK has found.
This increase is due to AI offerings such as large language models, advanced analytics and workflow automation entering the mainstream, CEBR says.
Nina Skero, chief executive at Cebr, explains:
“Our findings show AI is beginning to influence productivity outcomes in the UK mid-market in a meaningful way.
“However, productive adopters remain a minority within the mid-market. That suggests there is still significant headroom for gains across the sector. If more firms move from initial adoption to deeper integration, the aggregate impact on UK productivity and national output could be substantial by the end of the decade.”
HSBC UK has launched a scheme called the AI & Productivity Financing Initiative, which will provide £5bn of lending to help UK businesses invest in “essential, future-ready capabilities”.
Updated
Over in Germany, investor morale has tumbled as the Middle East conflict has threatened to push up inflation and derail Germany’s economic recovery.
The ZEW economic research institute’s monthly gauge has plummeted to just -0.5 points in March, down from 58.3 points in February.
Economists had expected a smaller fall, to 39 points.
Insolvencies jump as debt relief orders hit record
The number of people in England and Wales falling into insolvency has jumped.
There were 11,609 individual insolvencies registered in England and Wales in February, the Insolvency Service has reported this morning. This was 18% higher than in February 2025 and 6% higher than in January 2026.
There were a record number of debt relief orders (DROs), under which people can have debts of up to £50,000 written off, with restrictions.
Here’s the details:
The individual insolvencies consisted of 768 bankruptcies, 4,210 debt relief orders (DROs) and 6,631 individual voluntary arrangements (IVAs). The number of DROs in February 2026 was a record high in the monthly time series going back to their introduction in 2009, exceeding the previous high of 4,185 in August 2025.
The number of IVAs was higher than both January 2026 and the 2025 monthly average. Bankruptcies were 25% higher than in February 2025, although numbers were affected by the clearing of a backlog following the Insolvency Service moving to a new case management system.
The number of registered company insolvencies in England and Wales has jumped month-on-month, but was lower than a year ago.
The Insolvency Service has reported that 1,878 companies fell into administration or were liquidated in February, 7% higher than in January. On the upside, though, that’s 7% fewer than in February 2025.
Moneyfacts: 'Trumpflation' adds almost £800 to average annual mortgage bill
The spectre of ‘Trumpflation’ is looming over Rachel Reeves’s Mais lecture today.
The jump in energy prices, and expectations of higher inflation, have driven up mortgage rates since the Iranian war began.
Data provider Moneyfacts has reported that this has added almost £800 to average annual mortgage bill in the last two weeks.
They report:
Average 2-year fix has risen from 4.83% at the start of March to 5.28% today. It’s highest since April 2025.
Average 5-year fix has risen from 4.95% at the start of March to 5.32% today. It’s highest since February 2025.
Adam French, head of consumer finance at Moneyfacts, said:
“War in the Middle East has added almost £800 to a typical annual mortgage bill in just two weeks, which will be unwelcome news for anyone currently seeking a fixed rate deal.
“The average two-year fixed rate has jumped from 4.83% at the start of March to 5.28% today – its highest level since April 2025. The average five-year fix has risen from 4.95% to 5.32%, now at its highest since February 2025. For a borrower with a £250,000 mortgage over 25 years, that equates to paying £788 more per year on a two-year fix, or £651 more on a five-year deal compared to just a fortnight ago.
“Choice continues to fall as lenders pull deals and reprice in response to rapidly rising funding costs with 689 fewer mortgage products available since 9 March – almost a tenth of the market. Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a ‘Trumpflation’ wave flowing from the US and Israel led action in Iran.”
Oil and gas prices have risen again after Iran carried out attacks on production facilities for the first time since the start of the war with the US and Israel.
Brent crude, the international benchmark oil price, is up 4% at $104.17 a barrel this morning, nearly 50% higher than levels before the war began on 28 February. European wholesale gas prices are up 3% to €52.45 a megawatt hour, compared with about €30 before the war.
For the first time, Iran successfully targeted oil and gas production facilities, rather than just refineries, terminals and storage.
The United Arab Emirates said a drone struck the Shah natural gasfield – one of the largest in the world – on Monday and set it on fire. Operations remained suspended on Tuesday while officials assessed the damage.
The UK government’s push to adopt artificial intelligence systems faster than the rest of the G7 could raise concerns that Britain could face an early wave of AI-related job losses.
But Treasury minister Dan Tomlinson has tried to downplay to prospect of job losses caused by AI, arguing that it’s important to embrace new technologies rather than run away from them.
Asked whether he accepted AI adoption would lead to job losses, Dan Tomlinson told Sky News:
“In the vast history of the UK economy, when big shocks come, when you have the Industrial Revolution, or big changes in the technology that people use, there are changes to the amount of jobs that happen in the economy, or the types of jobs that we have, you don’t see job losses overall.
“And actually, if you look at the next five years, the Office for Budget responsibilities say that employment is going to increase in every single year of their forecast.”
Overnight, the Reserve Bank of Australia became the first central bank to raise interest rates since the Iran war began.
The RBA lifted its cash rate target to 4.1%, back to where it was in February last year.
Michele Bullock, the RBA governor, said strong growth in employment and spending had kept upward pressure on prices and the war in Iran would only worsen the problem.
“High petrol prices will add to inflation, but they’re not the reason for today’s decision.
“Inflation was already too high.”
It’s a busy week for monetary policy decisions, with the Bank of England, the US Federal Reserve, the European Central Bank and the Bank of Japan all setting interest rates this week, along with other central bank decisions in Canada, Brazil, Russia, Switzerland and Sweden.
Reeves to push for "Silicon Valley of Europe” in Oxford-Cambridge corridor
Chancellor Rachel Reeves will also announce she is ready to use compulsory purchase powers to force through the building of “the Silicon Valley of Europe” in a corridor between Oxford and Cambridge, the Financial Times are reporting.
Reeves will tell landowners they will not be allowed to stand in the way of the project, which she is putting at the centre of a revamped growth strategy alongside closer relations with Europe and investments in AI.
The chancellor would say in her Mais economics lecture that the government will intervene where landowners are deemed to be blocking developments or insisting on unreasonable demands, government officials said.
Updated
UK building materials supplier Travis Perkins has cautioned this morning that it faces a ‘subdued’ trading environment.
In its full year results for 2025, Travis Perkins reported that the weakness seen in the final three months of the year has continued in 2026, saying;
The trading environment since the start of the year has remained subdued and this reflects a continuation of the weak UK construction activity figures reported for the final quarter of 2025.
The company, which provides building materials to professional builders and tradespeople, also reported a drop in adjusted operating profit to £133m, from £152m in 2024, “reflecting lower margins in Merchanting”.
Reeves told to stop blaming Brexit for economic woes
There’s already a backlash to the chancellor’s Mais speech, before she’s even taken the lecturn at Bayes Business School.
The opposition Conservative parry is unhappy that Reeves is expected to blame Brexit for the UK’s poor economic performance.
Shadow chancellor Sir Mel Stride has accused the chancellor and prime minister of wanting “to row back on Brexit”, Sky News report.
Stride added:
“Labour are desperate to blame anyone but themselves for their economic failures.”
Reeves could cite the Office for Budget Responsibility’s long-term forecast that Brexit will reduce the UK’s long-run productivity by 4% relative to remaining in the EU.
Critics of the chancellor, though, could point to her tax rises on employer, which appear to be pushing up unemployment.
Updated
£2.5bn boost for AI and quantum
Here’s a breakdown of the £2.5bn funding package for artificial intelligence and quantum computing in the UK:
A £500m Sovereign AI Fund is set to be launched in April at Wayve, to give British companies access to funding, compute and other support
£2bn to upgrade the UK’s quantum capabilities, including a procurement programme worth up to £1 billion to procure commercial-scale quantum computers.
An extra £13.8m will be injected into the UK’s 5 National Quantum Research Hubs
A further £12m for a edicated commercialisation skills centre to help quantum researchers translate their work into ‘real-world impact’
Yesterday, technology secretary Liz Kendall said the government hoped to retain homegrown quantum startups, engineers and researchers rather than lose them to competing countries.
Introduction: Reeves to call for rapid AI adoption and deeper ties with EU
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
While the UK economy is being buffeted by the energy shock from the Iran war, chancellor Rachel Reeves is hoping that rapid take-up of artificial intelligence and deeper ties with the European Union can deliver growth.
Reeves is due to deliver a big set piece speech in London today – the Mais Lecture, at Bayes Business School. And she’s expected to identify innovation and AI, closer ties with Europe, and regional growth as three big opportunities for economic growth in the UK.
The annual Mais Lecture is a set-piece event for central bank governors, chancellors and prime ministers to set out their economic philosophy.
This will be the chancellor’s second Mais Lecture – in 2024, Reeves warned that the UK was entering an “age of insecurity” marked by stalling growth, stagnant living standards, political turbulence and global shocks.
Two years on, and plenty of global shocks later, Reeves will today pledge that the UK will adopt AI faster than G7 rivals, and announce £2.5bn of funding for AI and quantum computing.
In her lecture at lunchtime today, the chancellor is expected to say:
“In this changing world, Britain is not powerless. We can shape our own future. Our method is stability, investment and reform – through an active and strategic state.
“Today, I am making three big choices on the greatest growth opportunities for Britain in the decade to come: growth in every part of Britain, AI and innovation, and a deeper relationship with the EU.
“Our plan is clear. To build for growth, to champion innovation, and to make Britain the place where the industries of the future are created.”
And on AI, she will argue that Britain “cannot afford to stand still” in a world defined by technological change.
I’ll be at the Bayes Business School later today for full coverage of the lecture.
The agenda
10am GMT: ZEW Economic Sentiment Index
1.30pm GMT: The Mais Lecture 2026, delivered by Rachel Reeves, Chancellor of the Exchequer.
