Menzies LLP - sector predictions 2026

As we move toward 2026, individuals and businesses across all sectors are preparing for a year shaped by regulatory change, tax reforms, shifting economic pressures and new reporting expectations.

From M&A activity and insolvency trends to sector-specific challenges, businesses will need to balance rising costs with opportunities created by greater stability and emerging innovation.

Our experts share their key predictions for the year ahead, helping you plan with confidence and adapt to an increasingly complex landscape.

General Market Sentiment for Deals

Ross Wiggins, partner and head of deal advisory, predicts a rise in deal activity in 2026 as businesses adapt to greater stability in business taxes and signs that inflation and interest rates will fall in the short term.

Shareholders considering an exit within the next 1–3 years may accelerate plans to leverage the current known economic environment.

Buyers, including corporates and private equity firms, are expected to remain active, supported by significant funds ready for deployment. Wage inflation will continue to influence deal values and structures, especially in cost-sensitive industries.

The reduction in Capital Gains Tax relief from 100 per cent to 50 per cent for Employee Ownership Trust transactions is expected to shift focus toward traditional management buyouts.

Changes to Business Asset Disposal Relief and upcoming Inheritance Tax rules also mean business owners should revisit succession plans.

 General Market Sentiment for Insolvencies

There has been a clear uptick in UK restructuring and insolvency work as 2025 draws to a close, driven by consumer pressure and tighter business conditions. Cybersecurity-related distress is anticipated among mid-market entities.

Revised restructuring tools such as schemes of arrangement are expected to become more accessible to smaller and mid-market businesses, potentially reducing reliance on formal insolvency processes. Activity is expected to increase across major UK business hubs including London, Manchester, Birmingham and Cardiff.

Not-for-Profit: Social Housing

Maria Hallows, partner and head of social housing sector, highlights intensified regulatory scrutiny and cost pressures for social landlords in 2026.

Key priorities include investment in existing homes, decarbonisation, building safety and addressing skilled labour shortages. Refinancing challenges and financial performance concerns mean good governance and high-quality data are essential. Upcoming changes to FRS 102 accounting standards will require early planning for lease accounting and revenue recognition impacts.

Not-for-Profit: Charities

The charity sector will face more demanding reporting requirements with the Charities SORP changes reflecting broader FRS 102 amendments. These include new income-based tiering, bringing most operating leases onto the balance sheet, and a five-step revenue recognition model, alongside enhanced narrative reporting expectations such as ESG and impact. Trustees and finance teams have the opportunity to strengthen their annual reports by linking strategy, risk, reserves and impact more clearly to financial statements.

Not-for-Profit: Education

Sue Hutchinson, partner and head of education sector, forecasts 2026 as a demanding year, with tight budgets, rising staffing and estate costs and increased scrutiny on resource allocation. FRS 102 amendments will require early mapping of lease commitments and income streams to manage judgment areas and avoid year-end pressure.

Financial Services

In financial services, regulatory consolidation, compliance deadlines and shifting investment trends will shape 2026. Key deadlines include the 7 May 2026 implementation of mandatory safeguarding audits for CASS 15. Changes to Venture Capital Trust income tax relief are expected to drive front-loaded investment activity. Heightened FCA oversight, full Consumer Duty enforcement and new Sustainability Disclosure Requirements will require firms to adapt their operations and reporting. The evolving crypto framework will also require close monitoring.

Hospitality & Leisure

Laura Madeley, director and head of hospitality and leisure, describes cautious industry sentiment in 2026. Inflationary pressures such as rising labour costs will continue to challenge margins. However, demand for experiential and premium offerings is expected to grow, supported by strengthening international travel. Businesses should focus on pricing strategies, digital transformation and strategic partnerships to build resilience and capture growth.

Legal Services

The SRA has paused major consultations on client account restructuring and interest capping until late 2026. Legal firms may see early-2026 guidance reinforcing the need for written client agreements and fair interest policies. The profession is shifting toward data-driven decision-making, rolling forecasts and increased use of AI to manage work in progress and cash flow. Regional firms are expected to see growing private equity interest. AI governance policies are also becoming a key audit focus.

Manufacturing

Manufacturing faces cautious optimism in 2026 amid high energy, material and labour costs. While margins remain squeezed, digital adoption and advanced manufacturing practices offer opportunities to improve efficiency, reduce waste and compete globally - especially in aerospace, defence and high-value manufacturing.

Property and Construction

Headwinds that challenged the sector - including high interest rates, material inflation and labour shortages - are expected to ease in 2026. Falling interest rates, softer inflation and planning reforms may support growth in both residential and commercial markets.

Recruitment

Recruitment is expected to see steady growth in 2026, with strong activity in technology, healthcare, life sciences, finance and ESG-related roles. Regulatory changes, particularly around umbrella company regulation and worker status, will shape the landscape. AI-driven tools will continue to mature, improving sourcing and screening while challenging firms to maintain high-quality service.

Retail & Wholesale

Retail faces a cautious outlook in 2026, with successful brands expected to go beyond basic omnichannel by delivering seamless experiences. Shoppers are prioritising value-for-money and categories like health and beauty. AI will shape pricing and supply chain forecasting but introduces risks that require strong oversight. Cybersecurity and sustainability will be key priorities for future-ready retailers.

Technology

The technology sector remains a major driver of innovation and economic resilience, fuelled by digital transformation and sustained global demand. Tighter R&D tax relief requirements, increased scrutiny on revenue recognition and heavier sustainability reporting expectations will challenge finance teams. Data and cybersecurity reporting, talent shortages and ethical governance around AI are also priorities. Opportunities persist in AI, quantum, green tech and cloud solutions.

Transport & Logistics

2025 was turbulent for transport and logistics, with fragile supply chains and rising costs forcing operating model changes. In 2026, economic uncertainty, regulatory change and technological disruption will continue to challenge the sector. Agility, regional expansion and cross-border solutions are key, alongside sustainability pressures and talent shortages.

Forensic Accounting and Valuation Services

In forensic and valuation services, shareholder disputes and breach of warranty claims are expected to continue. Litigation funding and group claims remain areas of activity. Fraud sophistication is increasing with AI involvement, and valuation demand linked to tax and share schemes is expected to rise — particularly ahead of IHT changes in April 2026. A downturn in Employee Ownership Trust transactions is anticipated following changes to tax relief.

Looking Ahead to 2026

Overall, businesses will face a mix of tax changes, regulatory shifts, technological developments and market uncertainty. Preparation and informed decision-making are essential for navigating this environment. Whether managing financial pressures, planning transactions, seeking growth or strengthening resilience, strategic planning and expert support will be key to success in 2026.

Find out more: www.menzies.co.uk/sector-predictions/