The perilous economic conditions confronting Healey stem directly from the White House door, where Trump’s actions reverberate across continents. The US-Israel war on Iran drives inflation higher through the most serious shock to oil and gas prices in modern history. Global financial market turmoil triggered by this conflict compounds debt servicing costs for governments worldwide, a situation Trump’s reckless fiscal policy and threats to interfere with the US Federal Reserve only worsen.

A grim irony marked Healey’s first major speech as chancellor last week when he travelled to Coventry on the same day Jaguar Land Rover announced 4,000 job cuts at its headquarters just down the road. Trump’s tariff policies throttle the car industry, while his geopolitical posturing and steps to dismantle the post-Second World War western security consensus add pressure on Healey to ramp up defence spending.

Chancellor Reflects on Challenging Times

Healey refrained from directly calling out the economic headwinds sweeping in from across the Atlantic during his speech, though he expressed wistfulness about the timing of his appointment.

“In our British democratic system, if you have the privilege to serve, you don’t get to choose: you don’t get to choose the time, you don’t get to choose the circumstances,” he said.

Despite these formidable challenges, signs of resilience emerged last week when figures showed Britain’s economy unexpectedly shrugged off the worst Middle East fallout to grow at a robust pace in July, helped by rapid expansion of artificial intelligence. The chancellor recognises that Labour can take meaningful steps to cushion the blow and rebuild confidence rather than simply blaming the US for the country’s problems.

However, last week delivered another blow as the latest flare-up in the Iran war drove oil prices to $109 a barrel and fuelled a dramatic bond market selloff. As an open economy in the eye of the storm, the yield on 10-year UK government bonds, known as gilts, rose to almost 5.4% – the highest level for almost two decades.

Central Banks Face Moment of Truth

Central bankers in economies including the US, Japan, and the UK will face a moment of truth this week as surging inflation raises the prospect of higher interest rates. Policymakers in all three countries will set rates in the next seven days against the backdrop of turbulent global bond markets.

Investors will watch closely to see if Kevin Warsh, the new chair of the US Federal Reserve, can face down Trump’s demands for rate cuts and instead persuade Fed governors to raise them on Wednesday. Trump handpicked Warsh despite repeatedly demanding lower interest rates, claiming in a Truth Social post this month that the US should have the “LOWEST RATE of any country in the World”.

“The Fed Board, with its great new leader, must get smart – BE PATRIOTS for a change,” Trump added.

The central bank’s board of governors must contend with a renewed rise in oil prices after the US-Iran conflict intensified again. The cost of a barrel of crude surged past $100 last week for the first time since July, as the Strait of Hormuz remained all but closed to tanker traffic and Houthi rebels advanced along the Red Sea coast, threatening to choke off Saudi oil supplies.

Energy Prices Drive Inflation Fears

Oil prices eased slightly on Friday amid hopes of fresh talks to reopen the waterway but remained well above levels in the summer when Middle East hostilities temporarily abated. Higher energy costs will likely feed a fresh rise in US inflation, which has stayed above the Fed’s 2% target for more than five years.

Warsh said in a speech this month that without continued progress towards the target, Fed policymakers would have “work to do”. Data published on Friday showed annual US inflation unchanged at 3.4%.

Andrew Bailey, the Bank of England governor, has struck a calm note about above-target inflation in the UK, saying rising mortgage rates have done some of the work of a rate rise without the Bank taking action. Markets and economists predict the Bank will hold rates at 3.75% on Thursday.

UK Rate Decision Looms

Three of the nine members of the Bank’s monetary policy committee voted for a rate rise in July, and data published on Friday showing stronger-than-expected economic growth could amplify fears about inflation. Thomas Pugh, chief economist at RSM, a consultancy firm, said the latest rise in energy prices had “materially increased the chance” that the MPC will eventually follow other major central banks and raise rates.

The humanitarian and security situation in the Middle East continues to deteriorate, creating additional pressure on global markets. Yemen’s Council of Ministers devoted its session to addressing developments in the military, security, economic, and humanitarian situations amid ongoing perilous military escalation by Iranian-backed terrorist Houthi militias and its implications on national and regional security.

The Yemeni government confirmed its commitment to support armed forces and provide necessary supplies while directing concerned ministries to coordinate with local authorities and regional and international partners to provide urgently needed relief and humanitarian aid to internally displaced persons. These efforts include shelter, food, water, and health care as the conflict creates new waves of displacement.

Looking Ahead

As Healey prepares his autumn budget, the chancellor must navigate an unprecedented combination of external shocks beyond Britain’s control. Trump’s tariff policies, Middle East conflict, surging energy prices, and volatile bond markets create a perfect storm of economic challenges. Yet resilience in AI-driven growth and Labour’s determination to take meaningful domestic action offer glimmers of hope amid the turbulence.

The coming weeks will prove critical as central banks worldwide make consequential decisions about interest rates, oil prices potentially stabilise or surge further depending on Middle East developments, and Healey finalises his budget response to these mounting pressures. Britain’s economic fate may not rest entirely in Westminster’s hands, but how the government responds to these global headwinds will shape the nation’s trajectory for years to come.

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The cost-of-living crisis now threatens growth plans for nine in ten UK small businesses, according to new figures from Novuna Business Finance. The Business Barometer study, which has monitored the growth outlook of UK small business owners every quarter since 2015, reveals that 90% of small businesses say aspects of the increased cost of living threaten their growth plans for 2026. This represents a three-year peak in threat perception, with the level rising slightly from broadly consistent readings since 2022. The findings suggest businesses face sustained rather than temporary challenges. This requires long-term adaptation rather than short-term crisis management.

More than two in five small businesses-42%-express concern about clients or customers spending less money with them. The hospitality sector feels this pressure most acutely, with 60% of enterprises worried about reduced customer spending. Retail businesses face even steeper challenges, as 72% report concerns about declining customer expenditure. Beyond spending levels, one in two hospitality small businesses-48%-worries that cost-of-living pressures will result in a drop-off in overall customer volume this summer.

Supplier Cost Pressures Create Margin Squeeze

The challenge of managing rising costs creates a significant financial squeeze for many enterprises. A third of small businesses-33%-say they have been forced to absorb rising costs from their suppliers. However, 35% report they cannot pass inflationary price rises on to their own customers. Manufacturing businesses feel the impact of absorbing supplier costs most intensely, with 53% reporting this challenge. Agricultural enterprises face similar pressures, as 51% must absorb rising costs from suppliers.

Small businesses operating in hospitality and retail sectors face the greatest difficulty passing costs forward to customers. Both sectors report that 53% of enterprises cannot pass inflationary costs on to their customers. The combination of persistent cost pressures and uncertain consumer spending creates challenges. UK small businesses entering the second half of 2026 must navigate this difficult environment. With the majority unable to absorb supplier costs indefinitely, businesses require strategic financial planning. Many also face limitations on price increases and need access to flexible capital sources.

Energy and Operational Costs Burden Multiple Sectors

Energy costs negatively impact small businesses across the country. Nationally, 32% of business owners express concern about the impact of soaring energy prices on business running costs. An additional 29% worry about the rising cost of transportation and logistics. These cost impacts come in addition to the one in four enterprises-25%-that worry about rising rents and the burden of business rates. The impact of energy costs hits three sectors particularly hard. Manufacturing businesses lead with concerns, though specific percentages vary by sector. Agricultural enterprises also report significant energy cost worries. Transport and distribution companies face substantial challenges from rising energy prices.

One in five small businesses-21%-fear not being able to pay staff more money to help salaries stay in line with the rising cost of living. This figure represents an increase from 16% two summers ago, demonstrating growing pressure on wage budgets. The wage pressure compounds other operational challenges as businesses attempt to retain talent while managing multiple cost increases simultaneously.

Alternative Financing Options Gain Importance

Private credit provides flexible, long-term capital for thousands of small and mid-sized businesses that may not have access to traditional bank loans, according to industry data. The financing option supports well-paying jobs and real economic activity across sectors from manufacturing and healthcare to infrastructure and energy projects. The American Investment Council represents over two-thirds of the private credit industry in Washington. Private credit loans can be tailored to the specific needs of borrowers, offering an alternative to traditional bank lending.

Companies of all sizes and sectors receive private credit loans, including healthcare, infrastructure, technology, and IT. Instead of owning part of a company as private equity funds do, private credit provides loans that help strengthen and scale businesses. The U.S. Securities and Exchange Commission regulates private credit funds, which are structured to prevent risk. A recent report from the U.S. Government Accountability Office found that private credit lending practices are appropriate. The debt structure, documentation, and underwriting are robust and adequately protective of lenders, according to the assessment.

Community Development Financing Shows Growth

Citizens Financial Group Inc. provided more than $2 billion in community development financing in 2025, supporting the construction or rehabilitation of more than 8,000 affordable housing units. The Providence-based bank reported these figures in its “2025 Sustainability & Impact Report” released Monday. Citizens also reported more than $300 million in small-business lending and more than $20 million in philanthropic investments during the year. The bank expanded workforce development programming and continued progress toward long-term sustainability targets.

“As we recognize America’s 250th anniversary, we are proud to build on the long-standing role Citizens has played in supporting the communities we serve,” Chairman and CEO Bruce Van Saun said. “The progress reflected in this year’s ‘Sustainability & Impact Report’ demonstrates what is possible when investment is matched by action and the dedication of our colleagues.”

Alongside the report, Citizens announced a nationwide volunteer initiative tied to America’s 250th anniversary. The bank mobilizes employees for more than 250 volunteer opportunities across its footprint through Veterans Day. The initiative focuses on financial education, workforce readiness, neighborhood revitalization, and environmental stewardship. Citizens partners with nonprofit organizations including New York Cares, Boston Cares, Philadelphia 250, Jersey Cares, and Pittsburgh Cares. The effort engages employees in hands-on service projects as part of the broader national commemoration leading up to the semiquincentennial in 2026.

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