Uncertainty slows investment, raises borrowing costs, weakens confidence, and delays growth.

Uncertainty slows investment, raises borrowing costs, weakens confidence, and delays growth.

16th July 2026

When businesses and investors don’t know what’s coming: interest rates, tax policy, political leadership, global shocks, they wait.

Now that we’ve stopped waiting for England to win the World Cup, we can get back to waiting for the new Prime Minister to set out his plans for the country and the new Chancellor to get their head around the country’s finances or lack of them, and decide how to balance the books….. more waiting.

We’re in a vacuum and speculation fills a vacuum. Speculation is not helpful, but it is human nature. The very human owners of small and micro businesses are likely to speculate most because they are already struggling seriously and worried about how much more change, admin and tax burden, and cost of doing business pressure they may be facing.

Waiting means delayed investment and hiring leading to reduced expansion and weaker growth, which is exactly what UK data and market behaviour show.

Political and policy uncertainty directly hits business confidence

Recent UK market commentary shows that uncertainty over government direction, taxation, and the Chancellor immediately affects business confidence and investment appetite.

Speculation over the past 2 weeks over Andy Burnham’s incoming Chancellor has added another layer of uncertainty for businesses and risks weighing further on confidence.

When firms don’t know what taxes, interest rates, borrowing rules, labour regulations will be and what might or might not be reformed like business rates, and who the winners and losers will be they wait and pause decisions and just keep ticking over.

Markets react instantly to uncertainty too, raising costs for UK businesses

Bond and currency markets respond first when political or policy direction becomes unclear. This matters because higher borrowing costs for businesses make their investment more expensive:

• political uncertainty increases the returns investors demand

• this shows up in higher bond yields and currency volatility

• the UK is especially sensitive because one‑third of its debt is held by overseas investors

• shifts in confidence can move markets quickly and raise borrowing costs for firms

If a business is facing higher borrowing costs it is highly likely to start fewer investment projects.

Global uncertainty amplifies domestic hesitation

Geopolitical shocks such as the Middle East conflict, global inflation, supply chain disruption, feed into UK uncertainty. The Bank of England notes that:

• geopolitical risk

• trade uncertainty

• global financial stress

all reduce the accuracy of financial forecasts and widen the range of possible outcomes for the UK economy. That makes businesses more cautious and slows investment.

The Bank of England confirms uncertainty weakens growth

A senior Bank of England official stated that the UK faces more uncertainty than most economies, and that this uncertainty affects:

• business decisions

• consumer behaviour

• labour market confidence

• investment planning

He concluded that elevated uncertainty widens the range of plausible economic outcomes, making firms less willing to commit capital. When firms don’t know what the future looks like, they don’t invest.

Uncertainty delays growth

a. Investment is postponed

Businesses delay:

• opening new sites

• hiring staff

• buying equipment

• expanding production

b. Borrowing becomes more expensive

Uncertainty leads to higher gilt yields leads to higher commercial borrowing costs.

c. Consumers spend less

Households facing inflation, job insecurity, or political instability reduce spending on everything but the essentials.

d. Productivity stalls

Without investment in technology, training, and equipment, productivity growth slows.

e. GDP growth weakens

ONS data shows the UK economy is growing, but fragile, with geopolitical shocks and policy uncertainty still weighing on momentum.

Uncertainty is one of the biggest brakes on UK growth.

The evidence shows:

• political speculation

• unclear tax policy

• leadership changes

• global shocks

• interest‑rate uncertainty

all undermine confidence and delay investment.

The UK is particularly exposed because:

• it has high public debt

• a large share of debt is held by overseas investors

• businesses are already facing tight margins and high costs

• households are under pressure from inflation and weak real incomes

When confidence drops, investment stalls, growth slows and the economy stagnates.

The UK has been in the midst of uncertainty since the financial crisis of 2008. We’ve delayed decisions because of that crisis, Brexit, the pandemic, Ukraine, and now the ongoing uncertainty in the Middle East, plus all the political change over the last 10 years with a revolving door at 10 and 11 Downing Street and constantly changing ministers and officials. Churn is the only thing we’ve been certain of. It’s got to stop.