KEY THEMES+ ¦ DEMSA Summary

What you need to know this week

  • UK economic output contracted by 0.1% in October 2025, with output also down 0.1% over the three months to October, underscoring a fragile growth outlook for 2026.
  • Supply-side disruption continues to affect manufacturing: the Jaguar Land Rover cyber-attack remains a drag on production, with only a modest October recovery.
  • Market expectations remain for a further cut in interest rates, but the narrative of investment-led growth in 2026 is not yet supported by clear confidence indicators in households or businesses.
  • The Bank of England has warned about a potential AI-led valuation correction, noting stretched UK equity pricing versus post-2008 norms and US valuations reminiscent of the pre-dotcom period.
  • Motor finance redress planning is advancing: FCA consultation CP25/27 on an industry-wide consumer redress scheme has closed (12/12/2025).
  • The FCA is progressing insurance rules simplification, signalling a broader “smarter regulation” agenda and shifting more responsibility to firms for product review cadence and CPD expectations.
  • Water affordability pressures persist: Ofwat reports 47% of respondents struggled at least sometimes to pay household bills; 17% struggled with water bills and 32% were concerned about water bill costs.
  • Consumer affordability stress remains uneven by household type: Lowell data indicates pressure is greatest for single-parent households (44% worse off) and a divided picture for couples with dependents (30% improved; 39% worsened).
  • The FCA and ICO have jointly clarified expectations on Targeted Support and Direct Marketing, reinforcing the need to balance timely financial support communications with privacy/PECR compliance.
  • The FCA Regulatory Initiatives Grid (Dec 2025) indicates 124 live initiatives (down 13%), with notable timelines for Consumer Duty updates, complaints reporting reforms, AML changes, and open finance/smart data frameworks.
  • The FCA has confirmed final guidance on non-financial misconduct (PS25/23), bringing serious NFM clearly into scope of Conduct Rules and setting an implementation date of 1 September 2026.
  • A new public-sector recovery approach is emerging: the DWP consultation on Codes of Practice under the Public Authorities (Fraud, Error and Recovery) Act 2025 includes powers to recover debts from bank accounts and references debt advice multiple times; consultation closes 27 February 2026.
See also  KEY THEMES+ ¦ DEMSA Summary

Key Themes

Macroeconomic and market backdrop

  • UK growth indicators weakened, with output contracting in October 2025 and across the three-month period to October.

Operational disruption and cyber resilience

  • The ongoing Jaguar Land Rover cyber incident continues to affect production, highlighting operational fragility and the persistence of cyber impacts beyond the initial event window.

Financial stability and “AI bubble” valuation risk

  • The Bank of England has warned that valuations for AI-focused firms are “particularly stretched” and that a sharp correction is possible; UK equities are described as near the most stretched levels since 2008, with US valuation patterns likened to pre-dotcom conditions.

FCA policy direction: redress, returns, and regulatory pipeline

  • Motor finance redress scheme consultation CP25/27 has closed, advancing the design of an industry-wide redress mechanism.
  • The FCA consults on reducing late submission fees for regulatory returns from £250 to £100, with feedback due 19 January 2026.
  • The Regulatory Initiatives Grid (Dec 2025) sets out 24-month plans across multiple domains (Consumer Duty, complaints, AML, open finance, operational resilience, SM&CR reform), including 124 live initiatives.

Consumer Duty and outcomes-based supervision

  • The FCA’s pipeline includes planned consultation on Consumer Duty updates in mid-2026, including distribution chain considerations, alongside smaller-firm support via sector guides starting with consumer credit firms.

Insurance rules simplification and proportionality

  • The FCA is simplifying insurer and broker rules, giving firms more discretion on product review frequency and CPD requirements, and signalling further changes next year.

Culture, fitness & propriety and non-financial misconduct

  • PS25/23 confirms final guidance to tackle serious non-financial misconduct, introducing COCON 1.1.7FR and bringing serious NFM explicitly into scope for all regulated firms; effective 1 September 2026.
See also  KEY THEMES+ ¦ DEMSA Summary

Privacy, PECR and targeted communications

  • The FCA and ICO jointly reinforced the need to deliver timely, relevant information (including under the FCA’s Targeted Support framework) while respecting direct marketing preferences and data protection obligations.

Public sector debt recovery and safeguards

  • DWP’s draft Codes of Practice consultation proposes operational guidance under PAFER 2025, including recovery from bank accounts and, in the most serious cases, court application for driving licence disqualification where means to repay exists; closes 27 February 2026.
  • Reference is made to HMRC’s Direct Recovery of Debts safeguards (e.g., debt threshold, engagement attempts, visit, hold period, appeal route).

Cost-of-living pressures and vulnerability infrastructure

  • Ofwat’s cost-of-living data shows persistent bill stress, while CCW highlights performance and improvement areas for the Priority Services Register in water.
  • UKRN updated cost-of-living and accessibility leaflets, including Northern Ireland coverage.

Industry data and customer affordability signals

  • Lowell’s affordability insights show differential stress by household type and continued concern over essentials; broader Lowell resources include a vulnerability index and finfluencer-related research references.

Industry collaborations, technology and operating model change

  • Lloyds Banking Group and Inbest AI partnership integrates a benefits calculator into bank apps; positioned as improving customer financial wellbeing and resilience.
  • MoneyPlus implemented a new customer contact system with FourNet and NiCE, aiming to improve omni-channel routing and adviser time.
  • Crown Commercial Service launched Technology Services 4 (RM6190) on 12 December 2025, enabling public sector organisations to modernise systems and adopt AI/automation.

Events [link]

  • MEGA.AI sponsored Debt Buyer, Debt Manager and BPO event video and summary are published; event took place at the Lowry Hotel on 4 December 2025.

Key Statistics

  • UK economy contracted 0.1% in October 2025.
  • UK economy contracted 0.1% in the three months to October 2025.
  • Ofwat: 47% struggled sometimes or more often to pay household bills over the last year.
  • Ofwat: 17% report struggling with their water bill.
  • Ofwat: 32% are concerned about the cost of their water bill.
  • Lowell: couples with dependents — 30% improved vs 39% worsened in the past year.
  • Lowell: single-parent households — 44% report their situation has worsened.
  • FCA Regulatory Initiatives Grid: 124 live initiatives; 13% reduction vs prior edition.
  • Nationwide case cited: 24 Covid furlough payments totalling £27.3m over 13 months; £26.01m deposited over 8 days; ~£800,000 unrecovered.
  • FCA AML fines since 2021: 13 fines totalling £300,767,526 (as stated).
  • DWP consultation closes 27 February 2026; FCA late fees feedback due 19 January 2026.
See also  KEY THEMES+ ¦ DEMSA Summary

Newsletter Contents

  • UK growth contraction indicators (ONS) and implications for confidence into 2026.
  • Continued Jaguar Land Rover cyber-attack impacts and production disruption.
  • Bank of England warning on stretched valuations and potential AI bubble correction.
  • FCA CP25/27 motor finance consumer redress scheme consultation closure (12/12/2025).
  • FCA insurance rules simplification and next steps for further reviews.
  • Ofwat cost-of-living findings and CCW work on the Priority Services Register.
  • Lowell affordability signals, vulnerability index reference and finfluencer research mention.
  • FCA and ICO joint statement on Targeted Support and Direct Marketing; FCA consumer firm checker link.
  • FCA Regulatory Initiatives Grid (Dec 2025) and key pipeline items (Consumer Duty, AML, payments, complaints, open finance).
  • FCA PS25/23 final guidance on serious non-financial misconduct; implementation date 1 September 2026.
  • DWP Codes of Practice consultation under PAFER 2025 and links to HMRC DRD safeguards reference.
  • Collaborations and transformation: Inbest AI/Lloyds, MoneyPlus/FourNet/NiCE, CCS Technology Services 4 framework, Affinity Water support schemes, and MEGA.AI event video summary.

Find the full DEMSA newsletter, commentary and links here

#DEMSA

RO-AR insider newsletter

Receive notifications of new RO-AR content notifications: Also subscribe here - unsubscribe anytime