Worcestershire Area Council Updates for September

FINANCE SECTOR
The revised FRS 102, effective January 2026, introduces significant changes including full balance sheet recognition of leases in line with IFRS 16, a new five-step revenue model aligned with IFRS 15, and fair value guidance via Section 2A based on IFRS 13. Early adoption is permitted but must be comprehensive. Firms should now assess lease and contract impacts. The transition to ARGA has been delayed again, so the FRC remains the regulator for the time being. The revised ISA 600 introduces a top-down, risk-based group audit approach while the 2023 Ethical Standard tightens independence rules. From April 2025 audit exemption thresholds will increase. Tax changes include a 25 per cent corporation tax rate for profits over £250,000, rollout of the OECD’s 15 per cent minimum tax for multinationals with returns due in 2026, a unified R&D relief regime starting in 2025 and Making Tax Digital for income tax from 2026 for individuals earning over £50,000.

 

TOURISM SECTOR
Both the RHS Malvern Spring Festival and Royal Three Counties Show saw increased visitor numbers in 2024, up nine and six per cent respectively. Advance sales for the upcoming Autumn Show are running twelve per cent ahead year to date, with hopes that good weather will help deliver another successful event. Venue hire bookings remain strong with several contract extensions under negotiation. Despite economic uncertainty elsewhere, the local tourism sector, particularly at the Showground, continues to perform well.

 

AGRICULTURE AND HORTICULTURE SECTOR
Blue Tongue cases remain limited to Devon, Cornwall and one in Lancashire, although England remains designated as high risk. Dry weather has caused poor yields across the Three Counties and sporadic bird flu cases continue, making farming conditions challenging. The horticulture sector faces new RHS rules from next year requiring peat-free growing for nurseries and exhibitors. Some concessions have eased the transition but many nurseries, especially those sourcing from the Netherlands where no restrictions apply, may choose not to participate in RHS shows due to these changes.

 

INSURANCE SECTOR
Worcestershire businesses face growing risks and new opportunities as extreme weather events increase insurance claims, highlighting the need for stronger risk management and business continuity planning. With winter approaching, proactive maintenance such as clearing gutters and inspecting heating systems can help prevent costly damage. Cybersecurity remains a key concern, particularly for SMEs which often lack resources to recover from attacks, underscoring the importance of investment in digital security and staff training. On a positive note the insurance market is softening, offering businesses improved coverage options at lower premiums, helping them to protect assets and build resilience.

 

LOGISTICS SECTOR
The logistics sector continues to face a challenging operating environment. While driver shortages have eased since the COVID crisis, recruitment for warehousing and technical roles remains difficult, compounded by an ageing workforce. Costs remain high due to volatile fuel prices, insurance and increasing regulatory compliance. Recent cyberattacks on major supply chain partners such as M&S and Microlise have disrupted operations, emphasising the growing need for cyber resilience. Regionally Jaguar Land Rover’s slowdown is impacting logistics providers in the Midlands. Infrastructure pressures from congestion and poorly coordinated roadworks continue to cause delays, but opportunities remain for operators offering flexible, compliant and secure services particularly for irregular freight and seasonal supply chains.

 

IT SECTOR
The IT sector continues to grow with strong demand for managed IT and security services. Windows 10 upgrades to version 11 are accelerating ahead of the mid-October deadline, with extended support expected to be costly for those delaying migration. Recruitment is positive with new hires joining from competitors signalling a post-COVID recovery. Tariff changes have not yet significantly affected stock but may do so in the future. Cybersecurity remains a priority following high-profile attacks such as Jaguar Land Rover’s. Upcoming Chamber and EBC events on Cyber Security and AI are recommended. Overall demand remains high for managed IT, communications and support services as clients move away from poor service providers.

 

HOSPITALITY SECTOR
The travel and hospitality sector remains strong nationally, driven by rising domestic tourism, staycations and increasing digital adoption. Inbound tourism is forecast at 43.4 million visits with £33.7 billion in spending expected for 2025. While overall travel spend increases, domestic rail demand is falling and business trips are becoming shorter and simpler. Challenges include labour shortages, high energy costs and inflation. Locally Worcester and Worcestershire’s visitor economy contributes £939 million annually and supports over 19,000 jobs. No major new hotels have been confirmed although Debenhams may convert to serviced apartments and Fownes continues to be used for refugee housing. Tom Collins MP has sought advice on effective event sponsorship pitches for local businesses.

 

CONSTRUCTION SECTOR
The UK construction sector saw modest growth of half a per cent in the third quarter, led by private housing repairs, maintenance and infrastructure contributing between two and a half and four per cent. Residential new builds remain weak due to slow planning, funding uncertainty and cautious developer sentiment. Smaller builders face tight margins, rising finance costs and weaker demand. Labour and skills shortages persist, limiting capacity amid infrastructure growth. Material prices have stabilised although wage and compliance costs remain high. Forecasts predict 1.6 per cent growth in 2025 rising to 3.3 per cent annually from 2026 to 2029 driven by infrastructure, energy, utilities and industrial sectors. The solar sector is booming with new regulations from 2025 requiring solar panels on most new builds. Solar generation has increased by around a third year on year with nearly 48 per cent of Britain’s electricity coming from zero carbon sources in July 2025. Removal of planning permission for EV chargers in quarter three has eased installation processes supporting the clean energy transition despite ongoing net zero challenges.

 

EDUCATION SECTOR
Skills policy has shifted with ‘Skills England’ moving from the Department for Education to the Department for Work and Pensions under Secretary of State Pat McFadden while Jacqui Smith remains Skills Minister across both departments. Responsibility for education and training for those under nineteen remains with the Department for Education although apprenticeships may soon move to the DWP. The University of Worcester recently celebrated 1,700 graduates and is welcoming 3,500 new students with modest international growth in Nursing, Business and Education. The Help to Grow programme has supported 100 regional SMEs with a new cohort starting on 2 October followed by the Worcester Executive MBA launch. Dale Parmenter, CEO of DRPG, was awarded an Honorary Fellowship in recognition of his contribution to the region.

 

LEGAL SECTOR
The legal sector is evolving rapidly amid changing client expectations, technology advances and economic pressures. Clients are seeking clearer and more personalised services prompting investment in training and tools such as document and matter management systems. Many SME firms are streamlining back office functions and adopting automation in high-volume areas such as conveyancing and probate to free up fee earners for complex work. AI is emerging as a key driver enabling faster data analysis and reducing errors. Economic challenges are accelerating consolidation with many small firms under financial pressure. Regulatory changes including SRA reviews on interest income add complexity while recruitment and retention remain pressing issues driving pay rises for qualified staff.

 

REAL ESTATE SECTOR
Recruitment remains challenging with strong competition and salary pressures making it hard to attract newly qualified surveyors. August was quiet with some improvement in September but overall conditions remain difficult. Uncertainty around the Autumn Budget is causing delays in decision making while planning issues continue to hinder progress. Housing development is slow and heavily reliant on government funding though commercial development locally is steadier with reasonable demand.

 

RECRUITMENT SECTOR
The recruitment market presents a complex picture with vacancies decreasing month on month but skills shortages presenting supply side problems that continue to hamper growth. Concern is rising around the Employment Rights Bill that will start to come into effect next April which will bring major changes to how businesses need manage sick pay and unfair dismissal, on top of existing worries about fixed costs following the increase in NI in April 2025. Temporary staffing remains strong but permanent placements have softened, most likely due to Autumn Budget uncertainty. An HR conference in November aims to support businesses through these challenges.

 

HOUSING SECTOR
The housing sector faces regulatory pressures and rising National Insurance costs forcing cost reductions, lower bidding and increased investment in existing stock. Funding for housing associations remains positive with shared ownership steady. Skills shortages particularly in construction trades continue to challenge the sector. Two regeneration schemes are currently underway reflecting ongoing efforts to navigate these difficulties and drive progress.