Insurance Sector:
Overall, insurance premiums are softening and market appetite is improving, although management liability remains an exception due to legislative and political changes driving higher claim frequency and costs. Climate change continues to pose a genuine and growing threat, with increased frequency and severity of events such as localised flash flooding and storms affecting areas not traditionally considered at risk. Meanwhile, demand for cyber insurance is rising rapidly, yet fewer than 20% of organisations are insured, despite evidence that Cyber Essentials certification significantly reduces both the likelihood and impact of cyber incidents.
Logistics Sector:
The UK logistics sector remains active but faces ongoing pressures from rising costs, regulatory uncertainty and slower economic growth, with tight margins highlighted by recent administrations. Interest in alternative fuel vehicles is growing, but high upfront costs and limited infrastructure continue to slow adoption. Locally, Worcestershire sees steady demand for warehousing and transport, particularly from manufacturing, food and horticulture, although some operators remain under financial strain while awaiting clearer government commitments.
Business Services Sector:
Outsourcing remains a buoyant market as organisations look to reduce the cost and complexity of managing in house teams. Demand is strong for data management services, driven by the need for high quality data to support AI and advanced analytics, alongside a growing focus on using AI to improve efficiency and scalability.
There is continued demand for tailored customer service for complex enquiries and higher value goods and services, while fulfilment remains challenging due to rising labour and delivery costs and ongoing post Brexit complexity. Overall, businesses are seeking trusted outsourcing partners that can deliver flexibility, expertise, innovation and measurable outcomes.
Education Sector:
Worcestershire Update: The UK Government has announced that it will rejoin the European Erasmus programme from January 2027, allowing UK and European students to study abroad as part of their degrees without additional fees, at a cost of £570m. At the same time, UK university recruitment is strong, with UCAS applications up 15.6% nationally and the University of Worcester seeing a 19% increase year on year, alongside a rise of 520 enrolled students. Looking ahead, the Lifelong Learning Entitlement is set to launch in 2027, replacing traditional student loans and expanding access to flexible, degree level and technical courses for learners up to age 60. These changes sit alongside recent Budget measures, including higher tuition fee caps, the return of some maintenance grants from 2028, increased support for apprenticeships, and new funding initiatives across education.
Herefordshire Update: The academic year has started strongly, with the launch of a BSc alongside the existing Integrated Engineering and Mechanical MEng programs. The institution is partnering with the Army to introduce a new accelerated drone engineering degree in September 2026 and is developing a Defence Eco System in Hereford to support SMEs with growth and new opportunities.
Cyber Sector:
By late 2025, the cyber threat landscape is increasingly shaped by AI driven attacks and systemic supply chain exploitation, with ransomware as a service and multi stage extortion targeting businesses, retailers and critical national infrastructure. High profile incidents affecting major UK retailers, government agencies, healthcare systems and defence highlight growing risks to data, operations and national security, while attacks are increasingly extending into operational technology and industrial control systems. New threats such as AI enabled deepfake fraud and AI orchestrated espionage are undermining traditional security controls, prompting a strategic shift towards AI powered cyber defences and Zero Trust architectures to improve resilience and response times.
Real Estate Sector:
The residential market remains cautious, with buyers pausing or making low offers ahead of the Budget, although activity has been better than expected approaching Christmas and is expected to increase in the New Year if stock levels improve. The industrial market continues to show strong resilience, with sustained demand from national and regional occupiers, flexible landlord terms and prime mid box rents approaching £10 per sq ft, supported by several significant transactions across Worcestershire and the wider region. The office sector remains challenging, with demand driven by specification, parking and green credentials and largely static rents, while the retail sector continues to face pressure from store closures, online competition and reduced footfall, leading to high vacancy levels in prime centres and stronger performance in edge of town locations.
Voluntary Sector:
The organisation is facing financial pressures as external economic conditions tighten the 2026 to 2027 budget, leading to a planned £2m payroll reduction, redundancies and redeployment, continued challenges recruiting specialist roles, and likely below inflation pay increases, alongside significant investment needs in existing homes. However, there are positive signs, including reduced repairs demand, improved complaints performance, stronger operational results across rents, relets, repairs and customer care, more favourable loan terms, progress in renewing the vehicle fleet with a high proportion of electric vehicles, and continued strong demand for shared ownership despite a subdued housing market.
Transport Sector:
The haulage industry is facing tough trading conditions, with operating costs up 5.9% and margins around 2%, alongside continued upward pressure on drivers’ wages. A chronic shortage of HGV drivers and skilled mechanics, coupled with an aging workforce and rapid technological changes, is slowing operations. Industry confidence is at a 14-year low, insolvencies exceed long-term averages, and freight crime has cost over £1bn since 2020. Most operators are unprepared for the diesel phase-out, while locally, infrastructure issues like the lack of a Hereford bypass and poor road conditions persist. Despite this, ABE had a busy year, with turnover up 11%, though significant effort was needed for new driver training.
Construction Sector:
The UK construction sector contracted at its fastest pace since the pandemic in November 2025, with the S&P Global Construction PMI falling to 39.4, reflecting steep declines in housing (35.4), commercial (43.8) and civil engineering (30.0). New orders and employment dropped sharply, and business sentiment hit its lowest level since December 2022, partly due to pre-Budget uncertainty. At REHAU, commercial project starts are being delayed, with enquiries increasingly focused on upfront technical solutions for energy efficiency, while government delays on the Future Homes Standard and Home Energy Model add further uncertainty. Despite this, there remains a solid nationwide project pipeline, and REHAU’s volumes are slightly up on last year, though the market remains mixed.
Agriculture, Farming & Horticulture Sector:
From 6 April 2026, unused agricultural and business property relief allowances will be transferable between spouses and civil partners, effectively doubling the inheritance allowance to up to £2 million, with additional nil-rate bands potentially bringing the total to £3 million when passing farms to direct descendants. Blue Tongue remains a concern, with 249 cases reported since July 2025, though only a few in Worcestershire and Herefordshire, while the main outbreaks are along the South Coast and in Lancashire/Cheshire. Looking ahead, the World Hereford Conference will be held at Malvern Showground in June 2028, marking the first UK event since the 1950s and attracting international visitors to the region.
Legal Sector:
The regional legal sector is showing signs of consolidation and growth, driven by private equity investment, strategic M&A, and expansion by national firms into the Midlands. Market confidence is buoyant, particularly in employment, residential and commercial property, as well as renewables and tech, with M&A activity strong in defence, education, and food sectors. Changes to EOT tax treatment from November 2025 reduce the immediate benefit for founders, while EMI schemes are becoming more accessible and flexible from April 2026, supporting employee incentives. Overall, the market is maturing, with firms increasingly confident in pursuing significant mandates amid a cautiously evolving economic environment.
The legal sector remains broadly resilient, though performance varies by practice area, with widespread uncertainty affecting clients in the last quarter. Delayed government decisions—particularly around the Budget, the Employment Rights Bill, tax changes, and sector-specific policies—have led many businesses to pause decision-making, increasing demand for tax, restructuring, succession planning, and private client advice such as business-focused Lasting Powers of Attorney. Despite this uncertainty, activity remains strong in areas like defence, private equity interest in law firms continues to grow, and sector consolidation is accelerating as smaller firms face ongoing challenges.
Automotive Sector:
The UK automotive market remains stable in demand but is structurally misaligned with the pace of mandated electrification. Battery Electric Vehicles (BEVs) are now central to competitiveness, investment, and supply-chain stability, yet domestic production is limited, with only the Nissan Leaf built at scale in the UK. Other BEVs are produced overseas or at low-volume niche levels, leaving the UK heavily reliant on imports to meet ZEV sales mandates. This creates heightened investment risk for UK suppliers, skills displacement in traditional ICE sectors, and volatility for Tier-1 and Tier-2 manufacturers, particularly in the Midlands. Without rapid development of UK-based BEV platforms and battery supply, the gap between policy ambitions and industrial capability will continue to widen, posing a critical challenge for the sector.
Tourism Sector:
The UK travel and hospitality industry continues to face significant financial pressure, with many businesses struggling under rising operational costs, high taxes, and increased business rates, and with limited fiscal relief in recent Budgets. These challenges have tightened margins and raised ongoing concerns about sector viability. In Worcestershire, however, the travel and hospitality sector is performing strongly, with recent data showing international visitors spending more on accommodation, restaurants, and nightlife, a positive indicator for local businesses. The Visit Worcestershire Tourism Conference will return in January 2026 to help local businesses plan strategically for growth. Dominique Bray, Travel Trade and Business Growth Manager at Visit Worcestershire, has indicated plans to relaunch a MICE desk in 2026. There is still no update on the new aparthotel at the old Debenhams site, the Diglis Hotel has been sold, and there is no news on a new hotel at the rugby club or the return of Fownes.
Manufacturing Sector:
In Q4 2025, manufacturing in Worcestershire and Herefordshire reflected the West Midlands’ strong output, particularly in automotive supply chains and advanced engineering, supported by solid production and healthy exports. However, rising wages, National Insurance, energy costs, and business taxes kept confidence muted, with many firms taking a cautious approach to major investments and hiring despite steady production. Meanwhile, the tissue industry faces growing profitability pressures from global economic slowdown, geopolitical shifts, excess production capacity, and rising imports, compounded by higher labour and energy costs and transport challenges, requiring strategic action to maintain competitiveness and financial stability in 2026.
Construction Sector:
The construction industry nationwide appears to have lost confidence, reflecting a broader business disillusionment with the current Government, which many feel treats businesses as cash cows while showing little respect for the challenges of creating jobs amid rising costs. This has led to reduced risk-taking and a prolonged “wait and see” approach to investment, as higher taxes and shrinking profitability leave many questioning whether expansion is worth it. This dysfunction is mirrored in public services, highlighted by the severe flooding in Ewyas Harold, where poor maintenance and a lack of accountability among multiple authorities exposed a system more focused on shifting blame than taking responsibility.
Finance Sector:
Across the economy, conditions are mixed. Independent schools face a challenging period as they adapt to VAT on fees and the withdrawal of business rates relief. Manufacturing clients report reduced demand and pressure on margins, though overheads remain largely controlled and businesses are reluctant to lose skilled staff. Construction and related sectors are experiencing one of their toughest periods since the financial crash, with builders’ merchants having a difficult year, although some early signs of improvement are emerging. In contrast, niche sectors such as agrochemicals and data-centre supply chains continue to perform strongly, while a local apprenticeship provider reports its best year ever. Cyber fraud and crypto-currency risks remain ever-present and potentially existential, underlining the need for strong controls and insurance. Sustainability and net-zero strategies are increasingly important to funders assessing borrowing requests, and defence is a growing sector as the UK seeks greater self-sufficiency, creating new opportunities for suppliers.
Retail Sector:
Demand in the UK retail sector remains weak due to the current economic outlook. As our main turnover is with retail shops our turnover is very reliant on the buoyancy of the retail trade. When shops sales are weak so are ours. Our turnover for the year in the UK is down 5%. Our problems in the US are mainly tariff related. Tariffs on imports from both China and India are 50%. An indication of the effect is that whereas duty on a 40’ container was about $3000, now the cost of duty for the same products is approx. $50,000. We have had to substantially increase our selling prices and surprisingly sales have so far held up. Our turnover is 5% ahead in the US but only due to price increases.
Energy Sector:
Renewable energy reached a historic turning point in 2025, overtaking coal as the world’s largest source of electricity while supplying over a third of global power. Falling costs, rapid capacity growth, and advances in solar, battery storage, green hydrogen, and AI-driven grid management are accelerating adoption, with most new projects now cheaper than fossil fuels. The UK surpassed fossil fuels in energy generation and targets clean power by 2030, while China remains the global leader in new wind and solar capacity. Despite grid constraints and supply chain challenges, demand for solar and battery storage continues to grow strongly.