This week’s briefing dives into the latest shifts across the UK economy. We begin with the property market, where buy-to-let activity continues to decline and fresh debates around property taxation are gaining momentum.
New CPI data also gives us a clearer picture of inflation pressures and what they mean for rates, while the start-up sector has delivered some much-needed optimism with a surge in new business activity in the first half of 2025.
Here’s the full breakdown.
Investment in buy-to-let has taken a sharp hit over the past year. An estimated 170,520 landlords purchased properties in the last 12 months, down significantly from 255,780 the year before. That equates to an 85,000 drop in transactions, a sizeable slowdown in landlord activity.
The figures, compiled by Dwelly from The Mortgage Works and HMRC data, suggest just 6% of the UK’s 2.84 million landlords have expanded their portfolios in the past year. That compares with 9% as recently as Q1 2024, showing just how quickly momentum has shifted.
Regionally, the East of England led the way with 23,360 landlord purchases, followed by the East Midlands (21,720) and the South East (18,760). The North East remains the most active in relative terms, with 17% of landlords buying in the past year, although even that is down from 22% a year earlier. At the other end of the scale, Wales saw just 2,180 purchases.
The slowdown appears tied to uncertainty around the Renters’ Rights Bill. With reforms looming on tenancy rules, eviction processes and compliance requirements, many landlords are pausing rather than exiting altogether. Rising borrowing costs as well as increased taxation have also reduced the appeal for BTL investments.
Dwelly’s view is that this is more of a pause than a permanent retreat. They argue landlords will re-enter once legislation is settled, particularly in areas where yields remain strong.
As one spokesperson put it: “An 85,000 drop in annual landlord purchases is a clear signal that confidence has been dented by regulatory uncertainty, higher borrowing costs and slower house price growth. But this is not a mass withdrawal from the market, landlords are simply taking stock, and who can blame them with the Renters’ Rights Bill set to bring substantial changes to the sector.”
Chancellor Rachel Reeves has instructed Treasury officials to examine reforms to the UK’s property tax system as part of her Autumn Budget plans. With a £20 billion hole looming in the public finances, the Treasury is exploring ways to simplify and modernise taxes, particularly levies on housing.
So far, stamp duty has emerged as a prime candidate for reform. Widely criticised for discouraging property transactions and restricting labour mobility, economists have long argued that it hampers growth. Stuart Adam at the Institute for Fiscal Studies described replacing it as one of the most pro-growth reforms available, though he cautioned the impact may take time to materialise.
Reeves has ruled out hikes in income tax, VAT or national insurance, but she has signalled an openness to raising revenues through existing property and wealth-related taxes. In the past, she has written that council tax, based on 1991 valuations, is long overdue for revision. Some within Labour have even floated the idea of a so-called “mansion tax” or higher council tax bands for expensive homes.
Proposals by economist Tim Leunig have also resurfaced. He has argued for replacing stamp duty with a proportional property tax on homes worth over £500,000, while revamping council tax for lower-value homes. The challenge for Reeves is that such reforms would involve a dip in short-term revenues, something she can ill afford given her fiscal rules.
The chancellor insists her reforms must promote fairness and protect working people, while still raising growth. As she previously wrote: “We should also consider the case for its overhaul and replacement with a property tax, levied on property owners. It would be more equitable and it would place the burden on landlords and not tenants.”
UK inflation rose to 3.8% in July, coming in higher than expected and marking the 10th consecutive month above the Bank of England’s 2% target.
The main driver was travel costs, particularly air fares, which jumped 30% month-on-month as the earlier timing of summer holidays pushed up demand. Petrol added modestly to inflation, while food prices also played a key role. Food and non-alcoholic drinks rose 4.9% year-on-year, with beef, coffee, orange juice and chocolate among the worst affected.
Much of the pressure on food is coming from droughts in southern Europe. Poor harvests in Spain, Italy and Portugal have hit supplies of fruit and vegetables just as prices would usually fall in summer, pushing UK prices higher. With food accounting for such a large share of household spending, the political pressure on ministers is increasing.
Rising prices are already feeding into wage negotiations. Unions are demanding higher settlements as the cost of essentials climbs, while the government is trying to limit most pay rises to below 4%. The latest figures suggest rail fares could rise 5.8% next year, adding to household strain.
Some analysts, such as NIESR, still expect inflation to ease later this year, possibly opening the door to a November rate cut. But others warn upside risks remain. As economist Monica George Michail put it: “Given that several of the current drivers of annual price increases are one-off policy changes, we think the Bank of England may look through them and cut interest rates one more time this year. However, there remain upside risks, especially from food prices and sustained wage pressures, which will force the Bank to remain cautious.”
After a volatile 2024, start-up activity across the UK has rebounded strongly in the first half of 2025. According to the NatWest and Beauhurst New Start-up Index, 426,000 new companies were registered with Companies House, with 10 out of 12 regions recording growth.
The North East saw the fastest expansion, with 10,400 new businesses launched - a 19% increase compared to the previous half-year. Scotland (up 17.9%), the West Midlands (16.9%) and the North West (16.5%) also recorded notable gains, showing a shift in momentum away from the traditional dominance of London and the South East.
Sector data highlights the UK’s resilience in technology and services. Application software led the way with 34,700 new incorporations, while hospitality posted 26,800 new start-ups - an 8.5% jump. Construction and property development also saw strong activity, with 25,100 new businesses, up 7.2%.
NatWest has played an active role in this entrepreneurial push. Through its Accelerator programme, it has supported over 10,000 start-ups to date, helping create 12,000 jobs and attracting £700 million in investment. This year, the bank plans to back another 10,000 founders, launch a £1m funding competition, and roll out further digital support.
James Holian, head of business banking at NatWest, summed up the mood: “The first half of 2025 has shown that the UK’s entrepreneurial spirit is not only alive but accelerating. What’s particularly encouraging is that this momentum is not confined to London, with regional growth underscoring the strength and ambition of founders up and down the country.”
This week’s update once again highlights the challenges facing buy-to-let investors. With purchases continuing to decline and further regulatory changes on the horizon, activity is unlikely to rebound in the short term. That said, if the new rules ultimately simplify investment or make certain opportunities more attractive, we could see renewed interest in specific regions and price brackets.
On the wider economic front, the persistence of higher inflation wasn’t unexpected. Energy costs remain elevated, feeding through supply chains, while higher employment taxes continue to squeeze business margins and, in turn, consumer prices.
Balancing this, there was some brighter news from the start-up landscape. Activity has picked up meaningfully, particularly in tech-enabled businesses, with app development standing out as a notable growth area.