In Brief - October
1. Economic Uncertainty Stalls Business Investment and Triggers Job Cuts
The economic climate in October was dominated by a distinct wait-and-see approach from business leaders, driven by anxiety over the upcoming Autumn Budget and a high overall tax burden. This caution is evidenced by UK business investment decreasing by 0.3% in Quarter 3 2025, suggesting firms are actively delaying capital expenditure decisions while they await policy clarity and potential pro-growth reforms. This lack of faith in the external economic environment is palpable, with the measure of confidence in the UK economy falling to a two-year low among consumers and a majority of SMEs expressing a lack of confidence in the broader national outlook.
Furthermore, the high cost of employment, exacerbated by recent increases in Employer National Insurance Contributions (NICs), is having a material impact on the labour market. The number of payrolled employees fell by 180,000 in the year to October 2025, according to early estimates, underscoring the tough choices businesses are making to manage squeezed profit margins. This contraction is most keenly felt in the public sector, where employment intentions are now significantly negative, meaning more public sector employers expect staff numbers to decrease than increase. The immediate strategic priority for management remains optimising internal efficiency and rigorously scrutinising all hiring decisions.
2. Two-Speed Retail Market and Defensive Consumer Strategy
The retail sector in October presented a two-speed market, where essential food sales remained resilient, but non-essential spending was clearly suppressed as consumers went into a defensive spending mode. Total supermarket till sales saw a marked slowdown to +3.2% year-on-year growth, largely a result of price inflation rather than volume, as shoppers consciously held back their spend ahead of the Black Friday sales and the festive season. This caution reflects persistent pressure on household disposable income, with confidence in personal finances continuing to track below the long-term average.
In the non-food sector, sales were virtually flat, indicating significant consumer reluctance to commit to large or discretionary items. However, within this cautious environment, there were notable shifts: consumers increased their in-store visits to shop around and find the best savings, often utilising retailer loyalty schemes and price promotions (which accounted for 24% of sales). For retail leadership, the challenge is two-fold: successfully executing the complex inventory and logistics strategies for the upcoming 'Golden Quarter' to capture cautious spend, while also finding long-term strategies, such as developing premium private label ranges, to capture consumers who are "dining in home" more frequently to economise.
3. Leadership Focus: Agility, AI Integration, and Talent Development
In the face of ongoing economic and technological disruption, the focus for management and leadership has shifted toward cultivating agility, embracing technological integration, and investing in human capital. Leaders are increasingly prioritising technological evolution and embedding Artificial Intelligence (AI) into their strategic planning to enhance decision-making and drive operational efficiency, viewing it as an essential tool rather than an optional one. Crucially, the approach is focused on AI augmentation, using the technology to enhance human roles rather than aggressively replace them, though clerical, junior managerial, and administrative roles are noted as most susceptible to AI-driven headcount reductions in the coming year.
Underpinning successful technological adoption is the need for stronger leadership skills focused on continuous change and trust. Trust is identified as the single most critical leadership quality in the current environment, essential for managing dispersed hybrid teams and navigating the growing complexity of cyber threats and misinformation. To address the skills gap necessary for this digital shift, firms are focusing heavily on continuous learning and development. Management is tasked with creating environments that foster a growth mindset, ensuring that the workforce is continuously upskilled to integrate new technologies and maintain competitive advantage, even as they face pressure to reduce overall costs.
