Realism required about UK's thin-skinned economy as we head into 2026: Rashmi Dubé

This is an economy that flinches easily. We are vulnerable to shocks, short on buffers, and reliant on households and businesses continuing to “cope” rather than genuinely recover.

Services are doing most of the heavy lifting while productivity flatlines and public finances remain under strain. We are no longer in emergency mode, but nor have we rebuilt resilience.

For millions of households, the cost-of-living crisis has not ended; it has simply changed form. The pressure is quieter now, but more corrosive.

Affordability is no longer cyclical. It is structural. Wage growth exists on paper, yet frozen tax thresholds, higher taxes on assets and the delayed impact of mortgage resets mean disposable income remains under pressure. This is not a blip that will pass with a single Budget. It is the new baseline.

Looking into 2026, fiscal policy is firmly oriented towards stability and debt reduction, not stimulus. That means tight public spending, a broader tax base – including property and investment income – and an unforgiving focus on efficiency rather than eye-catching giveaways.

For Yorkshire businesses, this reality lands in three immediate ways. First, balance sheets and cash flow will face sharper scrutiny, with far less tolerance for weak fundamentals. Second, HMRC and lenders are likely to take a tougher line as compliance, transparency and risk management move up the agenda. Third, capital will be nudged towards infrastructure, the green transition and productivity-enhancing technology, rather than speculative or short-term bets.

Even policies that appear modest tell the story. Continued fuel duty support and open-data “fuel finder” tools underline how everyday operational costs – transport, energy, insurance – remain politically sensitive and commercially decisive. In a low- growth economy, resilience is built or lost in the detail.

The labour market reflects the same unevenness. Some sectors remain tight; others are cooling fast. Young people and career-switchers are particularly exposed. The Government’s planned Youth Jobs Guarantee from spring 2026 is aimed at nearly a million young people not in education, employment or training and signals growing concern about long-term economic scarring.

For employers, 2026 is likely to be the year when “talent strategy” stops being HR jargon and becomes a board-level risk, influencing how roles are designed, how apprenticeships work, and how mid-career transitions align with changing business models.

Boards should also brace for greater pressure to evidence fair routes into good work, including for those with disabilities or health conditions, as welfare reforms bed in.

Investors and regulators are increasingly joining the dots between workforce planning, productivity and ESG. Culture, training and inclusion are no longer soft aspirations; they are becoming measurable governance issues.

Technology adds another layer of fragility. AI is now embedded across business operations, yet public trust lags behind corporate adoption. Use of AI tools for news and information remains low, and scepticism about AI-generated content is widespread.

In 2026, the real challenge for businesses will not be whether to use AI, but rather how to govern it - ensuring clear accountability, transparent use-cases and

meaningful human oversight.

Climate risk has also moved from abstraction to lived experience. Warnings that drought conditions in parts of Yorkshire could persist into 2026, alongside flood and heat risks, raise uncomfortable questions about water infrastructure, land use and long-term investment priorities. National ambition around infrastructure is clear but delivery on the ground will be the real test.

The lesson as we head into 2026 is not pessimism, but realism. Growth alone will not fix a fragile economy. Resilience – financial, operational and human - will.

For Yorkshire, with its industrial depth, entrepreneurial energy and strong sense of place, the opportunity is real. But it will only be realised if we stop mistaking survival for success, and modest growth for economic health.

Rashmi Dubé is a lawyer, entrepreneur and ESG consultant