UK Economy Faces Stagflation Amid Service Sector Stagnation
The UK economy is projected to face stagflation as growth in the services sector stalled in March, according to S&P Global. The composite purchasing managers' index (PMI) fell to 50.3, marking the slowest expansion in business activity in six months, while input price inflation reached its highest level since April 2025, driven by disruptions related to the ongoing war in the Middle East. Economists warn that rising costs and declining consumer confidence could lead to a recession if the conflict persists.
UK government enacts Employment Rights Act reforms
The UK government has enacted the Employment Rights Act, introducing significant reforms aimed at enhancing workers' rights, including immediate access to Statutory Sick Pay and new paternity leave provisions for over 18 million employees. Business Secretary Peter Kyle stated that these changes, which will be phased in throughout 2026 and 2027, are designed to support employees while addressing concerns from businesses about potential increased costs and hiring challenges amid a declining economic outlook.
UK caps student loan interest rates at 6%
The UK government announced that interest rates on Plan 2 and Plan 3 student loans will be capped at 6% starting from September 1, 2026, as a measure to protect borrowers from rising inflation linked to the ongoing conflict in the Middle East. This cap replaces the previous structure of RPI plus 3%, providing stability for graduates in England and Wales amid concerns over potential inflationary pressures. Skills Minister Jacqui Smith stated that this action aims to shield students from the financial impacts of global events.
