Maybe it doesn’t feel like it in the week after Christmas, when bank accounts are depleted and we are still digesting a glum Budget along with the turkey, but Britain’s thorniest problem in 2026 is not a lack of money but a lack of confidence.
The public finances are in a mess because of the Government’s fixation on welfare, but there is still plenty of capital out there.
In his Capital Markets of Tomorrow report, Canary Wharf chairman Sir Nigel Wilson points out that there has never been such an abundance of money sloshing around the world in search of investment opportunities.
This includes £6trillion of long-term capital sitting in the UK’s pensions and insurance sector, which is an enormous pile of dry powder that could spark an explosion of growth.
So why isn’t more of it being put to good use in the UK? One answer is that this country is very good at talking itself down. The national habit of self-deprecation may be charming from Hugh Grant in a rom-com, but in the cut-throat world of global markets it is a liability.
Doom-monger: Rachel Reeves’ endless droning about a fiscal ‘black hole’, combined with repeated assaults on aspiration, has created a miserable, defeatist atmosphere
If there were a prize for this, then Chancellor Rachel Reeves would be a leading contender. Her endless droning about a fiscal ‘black hole’, combined with repeated assaults on aspiration, has created a miserable, defeatist atmosphere.
Her tax measures, which risk making ambition look foolish and welfare dependency appear rational, have undermined confidence in the work ethic. And the speculation that she encouraged about tax raids on pensions has led to a loss of confidence in saving for the future.
When people lose trust and confidence that they will be fairly rewarded for their work, they withdraw goodwill, become defensive and dodge extra effort. Precisely the opposite of what is needed to improve productivity and growth, in other words.
Loss of confidence moves fast from sentiment to reality, with concrete financial and human consequences. Investments are not made, people aren’t hired, prosperity moves elsewhere.
All of this is difficult for Reeves because she herself does not enjoy the confidence of her own party, let alone the electorate.
The problem pre-dates this Government, but Labour has made it worse.
Semiconductor designer Arm’s decision to re-list in New York rather than London has become shorthand for lack of confidence in the UK stock market.
The fact that UK pension funds now invest only a small fraction of their assets in domestically listed companies is being widely interpreted as surrender. The City remains a world-class financial centre but is now resented and maligned, rather than celebrated.
Britain has formidable assets, which it persistently underplays. US media giant Comcast’s interest in buying ITV’s entertainment business is a reminder that the UK is a cultural superpower.
The UK excels in life sciences. The NHS is a unique testbed for large-scale clinical research; yet a petty, short-term approach to drugs pricing and investment in new facilities is steadily eroding the confidence of Big Pharma chief executives.
We still have smaller firms such as Cambridge-based rare disease specialist Cycle Pharmaceuticals, which has been bucking the trend by taking over US companies and whose boss has pledged that if he floats the company, it will be here. But this is the exception when it should be the rule.
The UK’s strengths are real. We need to build on them, not squander our assets.
If we don’t back ourselves in 2026, no one else will.
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