This report is from this week’s CNBC’s UK Exchange newsletter. Like what you see? You can subscribe here.
The dispatch
After several years in the Big Apple, I knew my return to London would be a culture shock.
Instead of Times Square with its skyscrapers and blinding lights, I would roam around Piccadilly Circus and its Victorian buildings; Dunkin Donuts on every major intersection would be replaced by Greggs on street corners, and I’d be ordering a sausage roll instead of a bagel for lunch.
But beyond the trivial switch-ups, I was in for a bigger shock than I thought — on the economic front.
Firstly, the cost of living, from rent and utilities to public transport, has risen significantly.
A return train ticket from London to my family home in Norwich is now over 30% higher – costing a whopping £72, compared to the £54 it used to cost me 8 years ago.
It should perhaps not have been such a shock; the U.S. has, after all, experienced markedly lower inflation than the U.K. over recent years.
More recently, prices in the U.K. rose 3.6% in the year to June 2025, compared to a 2.7% increase in the U.S. The Bank of England now expects inflation to peak at 4% in September, only returning to its 2% target by mid-2027.
When I moved to New York, it was a year and a half after the Brexit referendum. All these years later, and Brexit continues to dominate discussions.
In conversations with CEOs and business leaders, I hear how Brexit still hamstrings the economy, particularly through trade barriers, increased border costs and reduced productivity compared to staying in the European Union.
The skyline of London’s financial district.
Leon Neal | Getty Images News | Getty Images
Equally concerning is that London’s reputation as a leading global financial center is increasingly in question, as it struggles to compete with the likes of New York, Hong Kong and Frankfurt.
Fundraising from initial public offerings in London, meanwhile, has tumbled to its lowest level in at least 30 years, according to data from Dealogic, in a sign the U.K.’s equity markets are losing their attractiveness.
Bank of England Governor Andrew Bailey told me last week that business uncertainty in the country remains very high, after I asked him about the effectiveness of interest rate cuts by the central bank.
“There is a much higher level of uncertainty and given that many investment decisions are irreversible once we take them, the value of waiting therefore goes up, and that is what is happening,” he said.
Another hot topic in London over recent months has been changes to the so-called non-dom tax rules for wealthy foreigners.
London’s property market has been particularly impacted by the uncertainty, according to property website RightMove, which cited confusion around the rules as one reason behind reduced demand from buyers — both domestic and foreign — in the capital’s housing market, as house asking prices fall.
Reviving London as a financial hub
Despite the challenges and setbacks, all is not lost. Business leaders tell me there is still hope and opportunity for London.
While there are upside risks to inflation, the Bank of England cut interest rates this month. The bank’s monetary policy committee cited progress in disinflation in underlying domestic prices over the past couple of years, as core CPI and services inflation remain flat, while highlighting the reduction in wage growth.
Lower interest rates could help to spur consumption and investment, as well as help to get the property market back on track. More affordable mortgages may ultimately allow for more parity between buyers and sellers in the second half of the year.
When it comes to Brexit, business investment in the U.K. stalled after the vote to leave the bloc in 2016. However, there have been some signs of recovery, with a focus on specific sectors like technology and pharmaceuticals. The U.K. has been seeking new trade deals outside of the EU, including with Australia, New Zealand and India — and of course, the U.S.
In fact, Britain’s trade deal with President Donald Trump — although worse than during his first term — is still better than the EU’s agreement with the U.S.
London-based chartered accountants and business advisors Lubbock Fine noted that the U.K.’s substantial tariff advantage could benefit the country as a manufacturing hub for EU companies, seeing them relocate to the U.K.
Yet, when it comes to rebuilding London’s reputation as a powerhouse in financial services, there is more work to be done.
Crucially, it will entail policymakers creating an environment that is conducive to doing business.
In my recent conversation with Antony Jenkins, former Barclays CEO, he highlighted the need to drive access to capital for start-ups and minimize the cost of doing business.
He was positive on the reforms that are being made to encourage more investment into the private sector and is interested in retargeting the R&D tax credit toward higher-growth businesses. But ultimately, Jenkins says there needs to be a bigger focus on growth policies to boost GDP per capita and attract entrepreneurial talent.
“Let’s face it, there’s many attractive things about the U.K. We have market leadership around the world in things like financial services, technology, AI, the creative industries, and the U.K. is a great place to live, so we have all these strengths,” he said.
“What we need to do is amp up the other things that will make this place more attractive for business.”
— Ritika Gupta
Top TV picks on CNBC
Andrew Bailey, governor of the Bank of England, discusses the central bank’s interest rate cut, inflation and the uncertainty surrounding future decisions on monetary policy.
CNBC’s Ritika takes a look at the capital’s housing market.
England Lionesses and Gotham FC’s Jess Carter tells CNBC’s Tania Bryer that social platforms “need to do better” to protect people online.
— Holly Ellyatt
Need to know
Elon Musk’s Tesla launches bid to supply electricity to British households. The Texas-based company formally submitted its request for an electricity license to the British energy regulator Ofgem at the end of last month.
The government won’t admit it, but tax rises are coming — and there are no good options. British Prime Minister Keir Starmer was asked about suggestions that tax rises would be necessary in autumn, but said he did “not recognise” the figures. Nonetheless, he declined to rule out hiking VAT, income tax and corporation tax.
Bank of England chief says no rift with UK government as Revolut licence delay draws scrutiny. Authorizing Revolut as a fully licensed bank has become an important issue for the U.K. government, particularly as key figures in the tech industry have challenged tax changes that affect the wealthy.
— Holly Ellyatt
In the markets
The U.K’s FTSE 100 has had a muted week, slipping 0.1% over the past 7 days to end Tuesday at 9,147.81.
After a jump in July (when it rose over 4%), the index seems to have put its feet up in August — much like many traders — following the uncertainty and accompanying market volatility surrounding Trump’s tariffs regime.
The performance of the Financial Times Stock Exchange 100 Index over the past year.
Sterling, meanwhile, has risen against the dollar over the past week. It was trading over 0.6% higher at $1.3517 late Tuesday after U.K. jobs data — which showed a cooling of the U.K. jobs market, but strong wage growth — and U.S. inflation figures, which sent the dollar lower.
U.K. government bond yields have also ticked higher, with the 10-year yield trading around 4.626% on Tuesday.
— Katrina Bishop
Coming Up
Aug. 14: U.K. second-quarter GDP; trade balance data for June; RICS house prices for July
Aug. 20: U.K. inflation data for July; retail price index for July
— Holly Ellyatt
