Welcome to This Week, in Review, our weekly roundup of the national news stories that caught our eye this week.
“This week’s business headlines offer a compelling study in contrasts, revealing a national economy pulled between ambitious growth and a quiet undercurrent of risk. On one hand, a new era of corporate consolidation is reshaping the retail landscape, while in tech, a quiet revolution is underway as the UK’s digital infrastructure expands at a breakneck pace.
Yet, these grand economic narratives are underpinned by a more fundamental story of talent—with a significant narrowing of the private-public education gap—and the lingering fragility of consumer confidence. Together, these stories paint a complex picture of a nation simultaneously building for the future, navigating present challenges, and confronting the human element that ultimately defines success.”
The UK's Data Centre Boom - Tech & Innovation
The UK is set to see its number of data centres increase by almost a fifth, with nearly 100 new facilities planned in the next five years. This ambitious construction drive, fueled by the rising demand for AI processing power, will see over half of the new centres built in and around London. Major US tech giants, including Google and Microsoft, are spearheading the investment, with one of the largest single projects being a planned £10bn facility in Blyth from the Blackstone Group.
However, the growth is not without significant concern. Experts have warned of the huge energy and water demands these facilities will place on national infrastructure. The National Energy System Operator (NESO) projects that data centres could add up to 71 TWh of electricity demand in the next 25 years, a figure that is already causing a moratorium on construction in places like Dublin. The challenges are not only technical but also political, with Deputy Prime Minister Angela Rayner overturning local planning rejections in the name of national infrastructure.
The Numbers behind the story
90+ New Data Centres
The number of data centres in the UK is set to increase by almost a fifth, from an estimated 477 to nearly 600.
£10bn
Investment
The largest single planned facility, from Blackstone Group in Blyth, is a £10bn AI data centre covering 540,000 square metres.
71 TWh Projected Demand
The projected growth could add up to 71 TWh of electricity demand in the next 25 years, redoubling the need for clean power.
The Business Journal View:
The push to make the UK an AI superpower is clashing with the realities of an aging national infrastructure. The government’s designation of data centres as “critical national infrastructure” reflects the strategic importance of this sector, yet it overlooks the practical challenges of securing power and water for these energy-intensive facilities. The story of Microsoft’s two planned data centres in Leeds, alongside Google’s £740m investment in Hertfordshire, paints a picture of a nation betting big on AI.
However, this strategy is not without risk. Concerns from operators like Equinix about lengthy planning processes and high energy costs—which have prompted some AI workloads to move abroad—signal a potential bottleneck. The key takeaway for business leaders is that while the UK is a strategic hub for global tech, the path to sustained growth is complicated by infrastructure and regulatory challenges that could drive up costs for both businesses and consumers. This is a crucial area to monitor as the government’s ambitious AI agenda unfolds.
The Mortgage Market Finds its Footing
The UK mortgage market has reached a significant symbolic milestone, with the average two-year fixed rate falling below 5% for the first time since the turmoil of the Truss mini-budget in 2022. This easing of rates to 4.99% reflects a period of heightened competition among lenders, who are now cutting margins to attract business in an “ultra-competitive” market. This development provides a measure of relief for the 900,000 fixed-rate borrowers whose deals are set to expire in the latter half of 2025.
While the Bank of England’s base rate has seen five cuts since August of last year, the path ahead remains uncertain. The Bank’s latest meeting saw a split vote on further reductions, and a recent forecast predicts inflation will spike to 4% in September before returning to target in 2027. This suggests that the base rate could hold at its current level for longer, potentially limiting further substantial drops in mortgage rates.
The Numbers behind the story
4.99% Average
Rate
The average two-year fixed mortgage rate has dipped below 5% for the first time since the Truss mini-budget.
900k Affected Borowers
This rate easing provides a measure of relief for the 900,000 fixed-rate borrowers whose deals expire in the second half of 2025.
3.7% Most Competitive Rate
The most aggressive lenders are now offering rates as low as 3.7%, reflecting fierce market competition
The Business Journal View:
The easing of mortgage rates to sub-5% territory is a welcome, if cautious, sign of stability in the housing market, which has weathered a period of unprecedented volatility. For homeowners facing remortgaging, this marks a tangible improvement in affordability, but it is not a return to the “rock-bottom” rates of the pre-2022 era. The fierce competition among lenders, highlighted by rates as low as 3.7%, suggests a market focused on retaining and acquiring customers in a climate of reduced borrowing activity.
However, business leaders and policymakers should remain vigilant. The forecast spike in inflation to 4% in September is a lingering economic risk, casting a shadow over the Bank of England’s future policy decisions. While rising wages and gradually improving affordability have helped house prices tick up, the broader consumer confidence remains fragile. The stability in the housing market is a sign of resilience, but the wider economy’s path depends on whether this newfound confidence can translate into sustained spending and investment
Corporate Consolidation: Kingsmill and Hovis Forge a Giant
The owners of Kingsmill, Associated British Foods (ABF), have agreed to acquire rival bread maker Hovis in a deal valued at an estimated £75 million, a move that could create the UK’s largest bread brand. The tie-up is a strategic response to decades of declining popularity for the packaged sliced loaf, with both brands struggling with widening losses. The merger aims to consolidate production and distribution, with a view to generating an estimated £55 million in savings, a process that is also expected to put jobs at risk.
The proposed acquisition will face significant scrutiny from the Competition and Markets Authority (CMA), which is expected to take up to a year to approve the deal. The CMA’s primary focus will be to determine whether the new entity faces sufficient competition from both the dominant market leader, Warburtons, and the powerful presence of supermarket own-label brands.
The Numbers behind the story
£75m Deal Value
Kingsmill owner ABF is buying Hovis for an estimated £75m.
£55m in Savings
The merger of production and distribution is expected to generate £55m in savings.
£4.7m Widening Loss
Hovis reported pre-tax losses of £4.7m, while Kingsmill’s division posted annual losses of £30m.The most aggressive lenders are now offering rates as low as 3.7%, reflecting fierce market competition
The Business Journal View:
This merger is less a story of a market leader swallowing a competitor and more a tale of two struggling brands combining forces to achieve viability. In a mature market dominated by powerful retailer own-brands and an innovative, family-owned giant in Warburtons, the strategic rationale for the deal is clear: a defensive play driven by the necessity of scale. The projected £55 million in savings through consolidation is a stark indicator of the financial pressures facing the sector, a problem that neither company could solve on its own.
The CMA’s impending investigation will be a critical test of the modern consumer goods landscape. The central question is whether the combined entity, despite its size, truly wields anti-competitive power in a market where the ultimate power lies with supermarkets and the low-cost options they offer. This consolidation highlights a wider trend across consumer sectors, where margins are squeezed and the only path to survival for heritage brands is often through scale and a ruthless focus on efficiency.
The UK's Growth Conundrum: Economic Health
The latest official data on the UK’s gross domestic product (GDP) reveals a complex and somewhat contradictory economic picture. In the second quarter of 2025 (April-June), the economy expanded by a modest 0.3%, a notable deceleration from the 0.7% growth seen at the start of the year. While this quarter-on-quarter slowdown might suggest a cooling trend, the result was a positive surprise to market expectations, which had anticipated near-stagnation.
The underlying data provides a source of confidence, with volatile monthly figures for April being revised upwards and a stronger-than-expected performance in June, driven by the service sector. When viewed across the first half of the year, the UK economy has delivered a solid 1% growth, a performance that remains stronger than that of many other advanced G7 economies and effectively dismisses immediate recessionary fears that were prevalent in some quarters.
The Numbers behind the story
0.3% Q2 Growth
The economy expanded by 0.3% in the spring quarter, slowing from 0.7% at the start of the year.
1% First-Half Growth
The UK economy has delivered a combined 1% growth over the first half of the year, outperforming other advanced economies.
Pandemic-Level Savings
UK consumers are saving a double-digit percentage of their income, a level not seen since the pandemic, indicating a lack of confidence.
The Business Journal View:
The latest GDP figures present a classic case of the proverbial glass being either half-full or half-empty. For the government, the half-full view is a welcome justification for its “fastest-growing G7 economy” narrative, particularly when viewed as a combined first-half performance. This resilience, in the face of persistent global trade uncertainty and tax rises, is undeniably a positive signal. However, the half-empty view reveals a worrying lack of consumer confidence. Despite rising post-inflation incomes, a constant fear of economic instability is prompting consumers to save at a level not seen since the pandemic. This saving behaviour is a critical headwind to future growth and suggests that the economy’s momentum is yet to translate into a genuine “feel-good factor” and increased spending.
For business leaders, the takeaway is clear: while a recession appears off the table for now, the economy is in a state of suspended animation. The burden of this uncertainty is disproportionately felt by the retail and hospitality sectors, which have curbed job creation. The IT industry, by contrast, continues to perform well, underscoring the divergence between different sectors. The question now is whether the solid macroeconomic fundamentals can eventually restore the confidence needed to unlock consumer spending and business investment, or if a cycle of self-fulfilling caution will continue to restrain growth.
The week’s headlines, from the national to the corporate scale, reveal an economy caught between powerful forces of change and deep-seated caution. While the promise of an AI-driven data centre boom and a slowly growing GDP paints a picture of a nation pushing forward, the defensive consolidation in the bread industry and a consumer saving like it’s a lockdown remind us that uncertainty lingers.
The path ahead is not yet written. The question remains whether the solid economic foundations can overcome a fragile sentiment, and if businesses will be brave enough to invest in the future before a cautious consumer decides to spend.