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Key trends facing UK business in 2025

Geopolitical tensions, economic uncertainties, extreme weather, workforce changes, and rapid technological advancements are increasingly impacting UK businesses, as highlighted by the Global Risks Report 2025 published by the World Economic Forum. Businesses must adopt dynamic risk management strategies to navigate these challenges and build resilience for the future.

Geopolitical tensions, economic uncertainties, extreme weather events, a changing workforce, and rapid technological advancements are some of the global forces and trends increasingly affecting UK businesses. Drawing on insights from the Global Risks Report 2025, Marsh McLennan specialists and clients gathered in London in February 2025 to discuss the implications of these risks and strategies UK businesses can apply to anticipate what’s on the horizon, adapt quickly, and build their resilience.

Global challenges impacting UK businesses

Within the framework of the Global Risks Report 2025, the panel identified four challenges facing UK businesses:

Geopolitics: Interconnected structural risks can affect entire strategies.
Climate change: Increased frequency and severity of extreme weather events can impact UK organisations and their supply chains.
Workforce: Demographic and technological changes require businesses to keep pace with workforce demands and workplace transformations.
Technology: Ransomware attacks are rising, with costs increasing nearly 20% year-on-year in the UK. While AI offers significant advantages, it also complicates cybersecurity.

Geopolitical dynamics

The Global Risks Report 2025 identifies state-based armed conflict as the most pressing global risk in the near-term, with nearly one-quarter of respondents ranking it as their top concern. This marks a shift from previous years when conflict was not prioritised, noted Christopher Coppock, head of geopolitical and economic risk analysis, Credit Specialties, Marsh. He highlighted recent data that shows that the world is experiencing the highest number of countries in conflict in modern history. While distant conflicts may seem unlikely to affect UK businesses, its impacts can ripple through global supply chains, leading to rising costs and supply disruptions.

A broader risk framework can help organisations assess their supply chain exposure to potential conflicts. Tools such as Marsh’s World Risk Review can assist businesses in understanding which countries face the greatest risks of default, currency controls, or other interventions.

Geoeconomic confrontation, including sanctions and tariffs, ranks third among current risks in this year’s Global Risks Report. Chris made the point that businesses often focus on immediate risks as they react to unfolding events or news stories, in many cases struggling to keep up with the pace. Frameworks that consider the likelihood, severity, and duration of trade decisions can help business make informed decisions amid complexity, especially in light of the fourfold increase in government trade interventions over the past five years. Marsh’s forthcoming Political Risk Report 2025 looks at this in more detail.

Climate change imperatives

Environmental risks dominate the long-term risk landscape, according to the Global Risks Report 2025. Extreme weather events will likely be the main risk in 2035, followed by biodiversity loss and ecosystem collapse, critical change to Earth systems, and natural resource shortages.

Nick Faull, head of climate and sustainability risk at Marsh, encouraged organisations to consider extreme weather events on two levels:

Asset level: How will assets — including buildings, people and operations, and emergency response processes — be impacted?
System level: How will the broader organisation be affected, in particular through impacts on suppliers, but also on critical infrastructure, resources and ecosystem services, customers, and on communities in which it operates? In addition, what impact will changing regulations and capital provider expectations have?

A return on investment approach can help an organisation quantify these impacts, allowing for proactive investments to mitigate future risks. Comprehensive monitoring of supply chains, using tools such as Sentrisk, can also enhance preparedness for extreme weather events. For example, a UK company learned how it was exposed to significant disruption as a supplier was at high risk of flooding. The supplier was located deep within its supply chain in Southeast Asia, which it had previously not been aware of. With better information, the company is able to build resilience into its supply chain to avoid future disruption.

Insurance can provide organisations with time to recover after a loss and build resilience. Parametric insurance can help organisations manage some climate risks not covered by traditional insurance, but ultimately insurance alone is not enough — organisations must focus on building resilience, said Nick.

The panel discussed how organisations can prepare for climate-related regulations. Nick said that the frequency of policy announcements is not necessarily increasing, however, the trend is toward fragmentation, with individual jurisdictions creating their own policies. This can complicate compliance efforts for UK businesses. Uncertainty about the implementation timeline and permanence of climate regulations poses additional operational risks that organisations must consider. Chris gave the examples of the EU Deforestation Regulation (EUDR) and the Carbon Border Adjustment Mechanism (CBAM), which have faced delays despite businesses investing in compliance.

A positive trend is emerging from lenders and investors who increasingly seek to understand the resilience of their investments, noted Nick. This underscores the importance of climate adaptation for organisations.

Workforce transformation

Labour and talent shortage were identified as the third risk in the UK, and ranked second globally in the World Economic Forum's Executive Opinion Survey. Technology is creating new jobs and delivery channels, but also introducing new risks and exacerbating existing ones, according to Daniel Imbeault, talent strategy partner at Mercer. This can lead to “tech anxiety,” as some tasks are susceptible to be automated while others require employees to reskill or change how they work. Employee burnout is another concern for UK business: Mental Health UK's Burnout report 2024, based on a YouGov poll of 2,060 adults, found that 91% of UK adults experienced high or extreme levels of pressure or stress in the past year and the number of employees feeling burnout has almost double since 2020 based on Mercer’s Global Talent Trends.

Addressing tech anxiety and burnout is crucial for nurturing colleagues’ mental well-being. As AI and technologies redefine the workforce and workplace, organisations are encouraged to not overlook the importance of “humanity” in leadership roles, said Daniel.

Organisations also need integrated and holistic talent management strategies to optimise an evolving, increasingly global workforce. This involves focusing on skills — reskilling and upskilling — to enhance workforce wellbeing, planning, and retention.

Technological innovation

Misinformation and disinformation, cyber espionage and warfare, and the adverse consequences of AI technologies ranked as significant concerns across time periods in this year’s Global Risks Report. Adverse outcomes of artificial intelligence technologies ranked fourth for the UK in the Executive Opinion Survey.

While there is no foolproof way to combat misinformation and disinformation, a long-term business effort to build resilience and support integrity is essential, said Kelly Butler, UK cyber practice leader at Marsh.

Organisations must balance leveraging AI with robust security measures, and they can do this by understanding the risks and rewards of adopting new technologies. Ethical questions about AI’s bias potential and its impact on workforces must also be considered. As businesses integrate AI, they should ensure that staff are trained to recognise deepfakes and potential biases. Marsh works with organisations to help train teams in detecting these issues and has developed a comprehensive risk and insurance framework to help organisations understand, mitigate, and transfer the risks associated with generative AI as part of their overall risk management.

Regulatory and ethical frameworks are evolving to address misinformation and disinformation as well as cyber risks and AI. However, navigating the regulatory and compliance landscape can be challenging, especially for multinationals facing varying privacy legislations.

The EU has taken the lead in articulating AI regulation with the EU Artificial Intelligence Act, which classifies AI systems into four risk levels: unacceptable, high, limited, and minimal. AI regulation is still in its early stages, and Kelly encouraged collaboration among governments, academia, and industries to shape its future.

AI has the potential to transform the insurance sector in areas such as underwriting, claims, fraud detection, and customer service, while also increasing operational efficiencies. Marsh is expanding its capabilities in areas such as training and awareness to help clients strengthen their resilience to AI, cyber, and misinformation risks.

Four strategies to lead through uncertainty

In an era marked by unprecedented disruption and evolving workforce expectations, businesses must adopt dynamic and adaptable risk management strategies. To help achieve this, the panel suggested that risk managers should:

Question assumptions about the world order, given the increasing number of tariffs and frequency of conflicts.
Take a holistic approach to the impacts of extreme weather events. By evaluating return on investment, business can justify investments in climate resilience and adaptation.
Listen to colleagues and develop strategies, programs, and communications accordingly.
Prepare, prepare, prepare for cyber risks.

There was a consensus that the risk environment is rapidly changing, with UK organisations and businesses worldwide trying to figure out how to effectively respond.