Each month we look at a few of the stories affecting businesses and the wider economy.
February’s update highlights growing pressure on businesses from rising costs, changes affecting electric vehicles, and new developments in inheritance tax relief.
Here are the key points.
Electric Vehicle Discounts Raise Concerns
The UK car market continued to recover in 2025, with more than two million new vehicles registered for the first time since the pandemic. However, the shift toward electric vehicles (EVs) is proving more complicated than expected.
EVs accounted for around 23% of new registrations, but this still fell short of the Government’s target of 28% under the Zero Emission Vehicle (ZEV) mandate.
Manufacturers are reportedly relying on large discounts worth several thousand pounds per vehicle to encourage buyers to switch to electric models. Industry leaders have warned that this approach may not be sustainable long term.
Government support, including a £2bn Electric Car Grant Scheme, aims to encourage adoption. However, proposals for a future per-mile tax on EVs could potentially slow demand.
For businesses considering electric vehicles for company fleets, the economics may continue to evolve as policy and incentives change.
Rising Costs Could Push Some Businesses to the Brink
Economic pressure continues to build for many UK businesses. Analysts warn that companies already struggling financially may begin to fail as higher costs take their toll.
A recent report highlighted a “triple pressure” facing many firms:
higher interest rates
increased energy costs
rising wage bills.
These pressures may lead to more closures of so-called “zombie firms” – businesses that have survived in recent years but remain heavily indebted and unproductive.
UK unemployment has already risen to around 5.1%, its highest level outside the Covid period in a decade.
While some economists believe restructuring could improve productivity over the long term, the short-term impact may include job losses and economic disruption.
Business Confidence Continues to Weaken
Business sentiment has also softened.
The latest British Chambers of Commerce survey, covering more than 4,600 firms, shows confidence at its lowest level in three years.
Taxation and inflation remain the biggest concerns for business owners. At the same time:
52% of firms expect to increase prices in the next three months
27% plan to reduce investment
fewer than half expect their turnover to increase over the next year.
Many businesses are therefore approaching 2026 cautiously, holding back on hiring and investment while they wait to see how the economic outlook develops.
Changes to Inheritance Tax Relief for Business Assets
There has also been an update to proposed inheritance tax reforms affecting business and agricultural assets.
From 6 April 2026, the Government plans to introduce a new cap on assets that qualify for full relief under Business Property Relief (BPR) and Agricultural Property Relief (APR).
The latest proposal increases the allowance to £2.5 million per estate, up from the previously suggested £1 million.
Where qualifying assets exceed that threshold, the excess may receive 50% relief instead of 100%.
The allowance will refresh periodically:
every seven years for individuals
every ten years for trusts.
For couples, the relief could potentially reach £5 million combined, as allowances are expected to remain transferable between spouses.
For business owners with significant assets or succession plans, this may be a good time to review longer-term estate planning.
Final Thought
The current business environment continues to evolve quickly. Rising costs, shifting tax rules and policy changes are all influencing how businesses plan for the future.
Keeping an eye on these developments can help you make better decisions, whether that relates to investment, tax planning or succession planning.
If any of these changes affect your business or personal finances, a short conversation can often help bring clarity to the options available.
Want the Full Report?
This article summarises a few highlights, but the full February Business News Round-Up download includes additional context and detail.
If you would like to discuss how these changes could affect your business or personal finances, reach out to the team.