Forecasting is a mug’s game, as the Bank of England governor Mervyn King once said. But I’ll sketch a few trends for 2026 nevertheless, starting on a positive note in the stock market before moving on to some of the many choices on an à la carte menu of gloom. The FTSE 100 index will have ended 2025 almost 20 per cent higher than it started – slightly better than the US S&P 500 index – and the consensus of fund managers is that (having closed for Christmas at 9,870) it will carry on upwards, perhaps even towards 11,000. Why? In short because many UK blue-chips in traditional sectors such as banking, housebuilding and mining have been undervalued for too long, because interest-rate cuts will help, and because stock markets have a mind of their own. But that tells you very little about the real economy, in which…
Down the drain
First, watch out for a deepening crisis in the water industry, on which the government has failed to issue a white paper proposing an effective new regulatory structure in response to the Cunliffe report, while the largest operator, Thames Water, totters towards collapse in the absence of a ministerial decision as to whether it should be temporarily taken back into state hands, or left to find a ‘market-led’ rescue.
Labour backbenchers are breathing down the Prime Minister’s neck in favour of permanent renationalisation. The Chancellor prays for a private-sector solution for fear of having to pay up for Thames’s broken infrastructure. A majority of the company’s existing bondholders, as London & Valley Water, have tabled proposals which accept a 25 per cent write-off of debt in return for appointing a new board to manage a turnaround; theirs is the only viable option today and a temporary state takeover is highly unlikely to produce better terms down the road. Further delays will make investors wary of water companies generally – raising their borrowing costs, delaying their repair programmes and increasing the likelihood of renationalisation across the entire sector, which needs (but won’t get) more than £100 billion of capital investment. In which case, you may be sure, anger will rise as water bills soar.
Farewell St Custard’s
Stand by for a second wave of destruction in the independent schools sector. Since the imposition of VAT on fees, plus the scrapping of business rates relief on schools that are registered charities, more than 80 have failed, affecting 25,000 pupils. But that’s a relatively small hit to a wider population of 2,600 private schools and 620,000 children. Stronger institutions adjusted their budgets, picked up strays from the closures, dipped into reserves to fund more bursaries and hunted abroad for wealthy parents. Some, including Radley and Rugby, took the opportunity to absorb vulnerable prep schools, reinforcing their own new-pupil pipelines.
Meanwhile, the government abandoned any pretence that the supposed £1.8 billion per year of extra tax proceeds would fund 6,500 new teachers for state schools. The Prime Minister said in June that the funds were needed for affordable housing, while the Tories claim there are ‘400 fewer teachers than when Labour came into office’.
In the hands of union-captive Bridget Phillipson – the Secretary of State for Education who will be remembered chiefly for her attack on ‘posh blazers’ – the raid has been exposed as the ‘worthless exercise in class warfare’ I said it would be when it was enacted. But the limited damage so far to this beacon of British excellence will redouble in 2026. Would-be private parents who are themselves feeling Labour’s pinch will ask whether the expensive school of their choice can survive for the number of terms or years their child needs, or will gradually reduce the quality of its offer in order to stay in business; and that will become a self-fulfilling prophecy as application numbers fall.
In this Darwinian struggle, St Custard’s and St Trinian’s were the first to fail. Some very good and very historic schools will go next, for no measurable transfer of advantage to state school pupils anywhere.
‘Tally-ho!’
Pub closures will also continue apace, more than 2,000 having been repurposed or abandoned in response to rising wage costs and changing drinking habits since the start of this decade. In that context, I’m very much in favour of banning Labour MPs from bars in response to a Budget sting that will lead, after steep increases in rateable values, to an average 78 per cent rise in pubs’ business rate bills. The instigator of the ban, Dorset publican Andy Lennox, says ‘the vast majority’ of his peers are ‘either going bust, struggling, or on their last legs… We need an emergency VAT cut to 13 per cent now’.
I very much doubt the Chancellor will heed that plea. In which case, I suggest rural publicans join forces with their allies in the hunting fraternity, who should announce that since trail hunting is to be banned, they will meet in pub car parks and set hounds on a prey that commands no public sympathy whatsoever but will provide fine sport for a field robbed of its proper heritage. ‘Tally-ho!’ should be the cry when any Labour minister is spotted trying to sneak in for a pint.
Winning flush
My Christmas competition invited readers to name an honest business in any of the 31 Carry On films that so deftly captured the British social attitudes of their era. The first nomination to hit my inbox – from H. Percy of London EC3 – was for GlamCabs, Hattie Jacques’s proto-feminist taxi firm that outsmarts a fleet of blokes in Carry on Cabby (1963). The second was for W.C. Boggs & Son, the bathroom ceramics manufacturer plagued by union bolshies in Carry On at Your Convenience (1971), suggested by M. Gove of Old Queen Street, SW1. Chocolate bitcoins – for which I make no prediction – to both winners.
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