There are reasons to be cheerful about UK plc in 2026. Here are four | Heather Stewart
Stalling growth, sticky inflation and fragile bond markets, the UK’s economic record in 2025 has hardly been one to inspire cheer,But in the spirit of the festive season, here are a few reasons to hope for a happier new year,The first is that, barring external forces, 2026 should not involve a repeat of this year’s fiscal drama,Rachel Reeves more than doubled the margin of error, or headroom, against her fiscal rules at last month’s budget, and that should gift the Treasury a quieter 2026,The chancellor’s spring statement should be a non-event for another reason, too: she announced that while the Office for Budget Responsibility will still carry out a forecast, it will not formally assess her against the rules.
So as some wise men – and women – advised her to do last year, even if there has been a marked deterioration in the outlook, Reeves intends to stand firm until the autumn budget.That would mark a welcome contrast with the tax and spend saga of the past year (though if Labour MPs choose to change the top team in Downing Street, the drama would be very much back on).A second reason for optimism is that after a gloomy year, recent surveys have included glimmers of hope.Official figures show Britain’s economy unexpectedly shrank in October.But the snapshot is backward-looking, assessing how activity had fared through the rear-view mirror.
The latest flash purchasing managers index for December, published by data provider S&P Global, suggests things could be improving.The reading on its monthly index jumped to 52.1, from 51.2 in November – with 50 marking the divide between growth and contraction.In the private sector, S&P said, “the rise in new business was the strongest for 14 months and mainly reflected a solid improvement in demand across the service economy”.
It would make sense that if, as many business groups have claimed, the chaotic budget buildup killed confidence, we should get a modest uptick in activity now that it is over.Neil Carberry, the chief executive of the Recruitment and Employment Confederation, says that chimes with what he is hearing from member companies.“There was a general sense that things got quite a lot better from the first week of September, and October, then the brakes went on a little bit in November, because of pre-budget chat.”He adds: “[Hiring] won’t come back this month because it’s December, but quite a few people are quite hopeful about what comes through in January and February.”A third source of optimism is the hope that consumers could respond positively to the latest Bank of England rate cut, the government’s £150-a-year energy bills relief package, and an end to months of tedious speculation over tax.
There are plenty of reasons for caution here.Not least a reluctance at the Bank to cut rates much further, despite weakness in the labour market.But if cheaper mortgages and energy bills do help to ease the squeeze, and – whisper it – restore a bit of feelgood factor, the evidence suggests some consumers could have some financial capacity to respond.The household savings rate – the share of income workers put away for a rainy day – has jumped to well above the long-run average since the Covid pandemic.In the second quarter of this year, it was running at 10.
7% – about 2.5 percentage points higher than the 1987-2019 average.Analysis by Michael Saunders, a former Bank rate setter, now of the consultancy Oxford Economics, suggests a heightened sense of financial insecurity is one explanation.After the jarring shock of Covid shutdowns, the energy price spike, and soaring interest rates, that would make sense.He is concerned this higher propensity to save could “cap consumer spending growth” for some time to come, dampening the economic recovery.
But viewed in a festive spirit of optimism, it does indicate a capacity for some households to loosen their belts a little, if the mood should take them.The fourth reason for hope is even more tentative, but potentially significant: recent productivity data has been improving.In what Andrew Wishart of Berenberg bank called recently “the good news story of the year”, the key measure of economic output per worker (vital for lifting wages and living standards) rose by 1% in the first half of 2025.This puts productivity “on course to record one of its better years since the global financial crisis of 2008-2009”.In some labour-intensive sectors, where there have been job cuts following Reeves’s changes to employer national insurance contributions (NICs), that is little more than a mathematical effect – fewer workers for a given level of GDP means more output per worker.
But Wishart’s early analysis also suggests productivity gains in other sectors, including IT,“We could plausibly be witnessing the beginnings of a boost from artificial intelligence,” he argues,As Reeves’s former chief economic adviser, the London School of Economics academic John Van Reenen has long argued, UK businesses have tended to underinvest in technology and innovation, leaning instead on the plentiful supply of cheap workers,Part of the largely unspoken logic of raising the minimum wage and employer NICs – which drove up the cost of hiring – was to tip the balance towards productivity-enhancing investment and innovation, which should be good for growth,Much, though, depends on the labour market’s capacity to re-absorb the workers laid-off in the process.
Lower interest rates from the Bank would help here, plus there are some indications that wage inflation is falling away.That could perhaps open the door to more rapid reductions.While the headlines point to a bleak midwinter for the UK economy, if you apply enough festive cheer it is just about possible to imagine a better 2026.Merry Christmas.
Top economists call for halt to Sri Lanka debt repayments after Cyclone Ditwah
A group of the world’s top economists – including the Nobel prize winner Joseph Stiglitz – have called for Sri Lanka’s debt payments to be suspended as it tackles the devastation caused by Cyclone Ditwah.More than 600 people were killed and hundreds of thousands of homes destroyed across the island, in what Sri Lanka’s president, Anura Kumara Dissanayake, called the “largest and most challenging natural disaster in our history”.The country’s $9bn (£6.8bn) national debt was restructured last year, after lengthy negotiations with creditors after the government defaulted on repayments in 2022. But development campaigners warned at the time that the burden on Sri Lankan taxpayers remained unsustainable
There are reasons to be cheerful about UK plc in 2026. Here are four | Heather Stewart
Stalling growth, sticky inflation and fragile bond markets, the UK’s economic record in 2025 has hardly been one to inspire cheer. But in the spirit of the festive season, here are a few reasons to hope for a happier new year.The first is that, barring external forces, 2026 should not involve a repeat of this year’s fiscal drama.Rachel Reeves more than doubled the margin of error, or headroom, against her fiscal rules at last month’s budget, and that should gift the Treasury a quieter 2026.The chancellor’s spring statement should be a non-event for another reason, too: she announced that while the Office for Budget Responsibility will still carry out a forecast, it will not formally assess her against the rules
Extremists are using AI voice cloning to supercharge propaganda. Experts say it’s helping them grow
While the artificial intelligence boom is upending sections of the music industry, voice generating bots are also becoming a boon to another unlikely corner of the internet: extremist movements that are using them to recreate the voices and speeches of major figures in their milieu, and experts say it is helping them grow.“The adoption of AI-enabled translation by terrorists and extremists marks a significant evolution in digital propaganda strategies,” said Lucas Webber, a senior threat intelligence analyst at Tech Against Terrorism and a research fellow at the Soufan Center. Webber specializes in monitoring the online tools of terrorist groups and extremists around the world.“Earlier methods relied on human translators or rudimentary machine translation, often limited by language fidelity and stylistic nuance,” he said. “Now, with the rise of advanced generative AI tools, these groups are able to produce seamless, contextually accurate translations that preserve tone, emotion, and ideological intensity across multiple languages
A tape measure, a metal detector and a spirit level: 25 surprisingly useful things you can do with your phone
While many use our phones predominantly to doomscroll, smartphones have a range of little-known functions that could make life better and easier – from heart monitoring to even developing camera filmOur smartphones are magical things – far more than dopamine drip providers and a way to keep in touch with friends and family. Using the built-in features and easily available additional apps, there are plenty of clever things you can do with your smartphone.The iPhone’s Measure app uses augmented reality and the device’s camera to calculate everything from ceiling heights to room dimensions – handy for those DIY tasks that require a quick decision. And, good news for parents, Apple also points out that you can use it to measure a person’s height: the digital equivalent of etched markings on the wall.Metal detectors cost a pretty penny, but many modern devices have built-in magnetometers designed to help improve the accuracy of GPS within apps
My surf addiction didn’t need more fuel. Then I found the WSL third-tier live stream | Kieran Pender
At first, it seemed like a natural progression. I have long been a surf fan, I regularly write about the World Surf League (WSL) Championship Tour, and once even tried my hand in a local surf competition. And so in recent years, during breaks between top-tier WSL events, I found myself glued to live streams for the second tier, the Challenger Series.Only this year, the WSL wrapped up in September, and the Challenger Series had major gaps in its schedule. And that was how I found myself addicted to third-tier surfing, the WSL Qualifying Series (QS)
Arrogant England’s cricket machine collapses like a castle of dust in 11 days | Barney Ronay
So this is Christmas. And what have we done? The Ashes is over. With two Tests still to comeWhen the moment finally came the visuals were perfect: clean lines, neat angles, figures picked out in crisp afternoon sun against the almost satirical splendour of Adelaide Oval.Scott Boland took the final wicket to seal Australia’s unassailable 3-0 Ashes series lead, the 74th time this moment has been played out down the centuries, and immediately the white shapes converged to form a bobbing huddle. England’s batters stood in an attitude of formal deflation
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