Edition 10

Nov 27, 2025

Your Business Snapshot:

📈 Nobel Prize winners reveal how innovation drives long term growth

📊 Oil cuts, retail change and housing momentum drive key shifts across sectors.

⚖️ The FCA resists deep reporting cuts to protect market visibility and financial stability.

🛡️ Europe scrambles to build cyber resilience as rising attacks expose fragile defences across sectors.

Source: https://news.sky.com/story/fca-consumer-chief-mills-to-leave-city-watchdog-13474444

Economics

The Economics of Innovation

On October 13th, 2025, the Nobel Memorial Prize in Economic Sciences was awarded. The prize is an annual award for outstanding contributions to economic research, which was established by Sveriges Riksbank in 1968 to honour Alfred Nobel[1]. Joel Mokyr, an economic historian at Northwestern University in Evanston, Illinois, received the first part of the award, while the second part of the award was shared by the economic theorists Philippe Aghion at the Collège de France in Paris and the London School of Economics and Political Science, and Peter Howitt at Brown University in Providence, Rhode Island[2].

Although early societies developed essential inventions such as the windmill and the printing press, these innovations did not lead to lasting increases in productivity. Mokyr showed that the missing ingredient was what he calls "useful knowledge" technological advances grounded in scientific understanding rather than trial-and-error[2]. He demonstrated that once inventors understood why their machines worked, progress could advance systematically. This shift created a self-reinforcing cycle of innovation that became the foundation for the modern economy. As said in "Nature", economic growth at a rate of 1 to 2% annually is the norm for industrialized nations today[1]. Moreover, as described in the New York Times, Mokyr sees forces at work in the rapid advances of artificial intelligence, mRNA technologies and genetic engineering, highlighting that the last two decades have been “an age of radical innovation”[4]. As Mokyr said, he expects those advances to continue. However, at the same time, Mokyr fears that policies restricting immigration, limiting scientific collaboration, or weakening support for research risk slowing this engine of progress. He argues that growth "depends on allowing the best and brightest to pursue new ideas".

In 1992, the two theorists Philippe Aghion and Peter Howitt first introduced their mathematical model of "sustained growth through creative destruction," explaining how innovation disrupts markets as indicated in "The Nobel Prize". "Nature adds that their model “recognizes the messiness and complexity of how innovation happens in real economies”. At the core of their theory is the idea that growth relies on a constant replacement of old technologies and outdated firms with new, more efficient ones. Underlying economic growth, in other words, is a steady churn of businesses and products. When companies innovate, they bring superior products to the market, making older ones obsolete. The two theorists support that “the idea that a country’s productivity level increases by companies going bust and new ones coming in is a difficult sell, but the evidence that that’s part of the mechanism is pretty strong.” meaning that when inefficient or outdated firms close down, space is created for new, better, more productive firms to enter the market. Those new firms often use newer technology, more efficient methods, or better ideas. That raises the overall productivity of the whole economy. They emphasise the importance of states investing in Research and Development (R&D) to remain competitive and innovative. Yet, their theory acknowledges the social costs of creative destruction. New technologies create winners and losers, and the process often leads to job losses and company failures. Aghion and Howitt emphasize the need for safety nets and constructive cooperation to help workers and communities adapt. Moreover, Aghion has voiced concern about “dark clouds accumulating,” raising the point that, "trade barriers and deglobalization make markets more fragmented and reduce opportunities to exchange ideas.".

In summary, the recent Nobel Prize awards demonstrate the extent of economic advancement that we have experienced both today and in the past.

Business

Three forces steering markets

This week brings a mix of supply shocks, sustainability moves and renewed optimism across global markets, shaping an active backdrop for business watchers.

European oil producers have announced another cut to output, sending crude prices higher this week. The rise is already reflected in airline ticket fees, with several carriers adding a modest fuel surcharge to their fares. Analysts say the move could tighten margins for airlines that are already coping with fluctuating demand, while benefitting energy‑focused investors who see the tighter supply as a boost to earnings. The price pressure also ripples into logistics firms that depend on diesel, prompting some to renegotiate freight contracts. Meanwhile, commodity traders are eyeing the shift as an opportunity to lock in futures at premium levels, adding a layer of volatility to market forecasts[1].

A leading fashion retailer based in London unveiled a new sustainability roadmap, promising that half of its collections will be made from recycled fabrics by 2027. The plan includes a pledge to redesign its supply chain, using more transparent sourcing and circular design principles. The company will invest in on‑site textile recycling facilities and partner with suppliers that meet strict environmental standards. Investors have welcomed the initiative, noting that ESG‑focused funds are increasingly looking for tangible commitments from apparel brands. The retailer also expects cost savings from reduced waste and aims to report progress in quarterly sustainability dashboards, a move that could set a benchmark for the broader industry[2].

In the U.S. housing market, mortgage applications have risen for the first time in six months as interest rates level off. First‑time buyers are re‑entering the market, drawn by more affordable financing and a modest uptick in new‑home construction. Homebuilder inventories have expanded, allowing buyers to choose from a broader range of floor plans and energy‑efficient designs. The trend suggests a potential rebound in residential spending, which could lift consumer confidence and support broader economic growth. Lenders report a slight improvement in credit quality, and some regional banks are seeing increased demand for renovation loans as homeowners look to upgrade existing properties[3].

These developments highlight the interconnected nature of today’s markets. Higher oil prices pressure travel costs, sustainability moves reshape retail investment appeal, and a steadier housing market fuels consumer optimism. Together they create a dynamic backdrop for the Bath Business Society, offering fresh angles for discussion and analysis.

Markets

FCA resists hedge fund pressure to cut trade reporting

The UK’s Financial Conduct Authority (FCA) is drawing a strict line on how much information regulators and the public can see on trades, prices and financial shares following Brexit. Hedge funds and other buy-side firms are lobbying for a cut in transaction reporting regulations. This has led to the FCA taking a more cautious approach, reducing costs and simplifying the system but still collecting key information to monitor markets, spot risks and tighten rules.

Industry groups representing hedge funds and private credit managers want the UK to move closer to the US and Japanese model, with fund managers wanting to take themselves out of the reporting process. Their key reasoning is to remove buy-side transaction reporting and instead relying mainly on data submitted by sell-side firms such as banks and brokers. This aims to scrap any duplicated reporting, which often adds time wastage and costs, which hinders the UK’s competitiveness[1].

The FCA’s consultation explains why it cannot cut reporting as much as hedge funds want. The UK is a major global trading centre, and more than half of trades involve UK fund managers dealing with banks and brokers based outside the UK. If fund managers stopped reporting their trades, the FCA and the Bank of England would lose sight of about 56% of these deals, especially in corporate bond markets[1]. That would be too risky for market supervision and financial stability. Whilst saving money is important, the FCA is not willing to risk the cost of losing key data. Hedge fund groups are unhappy, they like some of the changes, but think the UK is missing a chance to go further and become more competitive.

Instead of scrapping lots of rules, the FCA is planning a targeted tidy-up of the system it inherited from EU MiFID (Markets in Financial Instruments Directive) rules. It wants to stop collecting data it hardly ever uses, for example on some foreign exchange derivatives and about 6 million instruments traded only on EU venues[2]. It also wants to shorten the time firms must fix past reporting mistakes from five years to three. The FCA estimates these changes will save firms more than £108m a year, out of about £493m they currently spend on transaction reporting[2]. The regulator openly admits that some of the information it collects today is rarely used and puts an unfair cost on firms[3].

Tech

The Financial Times Cybersecurity Resilliance Summit 2025

The Financial Times Cyber Resilience Summit Europe 2025 could not be arriving at a more relevant moment. Over the past year alone, Europe has seen airport shutdowns caused by ransomware, UK hospitals cancelling surgeries after system breaches, and a major German manufacturing firm suspending operations for days due to a compromised supplier. These incidents have made one thing clear: cyber risk is now a systemic business issue, not a technical inconvenience[1].

This summit gathers CISOs, policymakers, and industry leaders to confront a threat landscape that is moving faster than most organisations can keep up with. A recurring theme was how fragmented Europe’s cyber defences still are. Despite rising attacks, companies continue to rely on patchwork security tools and outdated processes. Speakers from NATO and Europol warned that this fragmentation is creating “blind spots” across national borders, supply chains, and critical infrastructure, leaving businesses exposed in ways they often don’t realise until it’s too late[2].

The FT’s accompanying (free) Cybersecurity Report shows how the attack surface has exploded due to rapid cloud adoption, remote work, and global vendor networks[3]. Even organisations with strong internal security are now vulnerable through suppliers (a point reinforced by last year’s MoveIT breach, which impacted hundreds of firms globally through a single software weakness). No surprise, then, that over 60% of surveyed firms said their biggest fear is a third-party compromise.

Another major talking point was the shift from “cybersecurity” to cyber resilience. With attacks becoming inevitable, leaders are now focused on business continuity; aka how quickly can a bank restore payments? How long can a hospital operate without patient systems? Financial-services speakers stressed that a few hours of downtime can ripple across markets, disrupt settlements, and decrease trust[4].

Two panels captured the new direction of thinking. Digital Defence: Proactive Strategies for Cyber Threats made the case for real-time monitoring, continuous stress-testing, and treating cyber risk like financial risk; measurable, modelled, and routinely challenged[5]. Meanwhile, the European Cybersecurity Landscape panel underscored a regulatory shift already underway: the EU’s NIS2 directive, stricter reporting deadlines, and upcoming rules on cyber-insurance are pushing firms toward shared responsibility and cross-border collaboration[6].

Key takeaway: resilience is not about avoiding every breach. It’s about designing systems, partnerships, and processes that can absorb shocks and recover quickly when attackers get through. And as recent disruptions have shown, this mindset is becoming essential for every sector, from finance to healthcare to manufacturing.

Bonus Section

Cocoa mogs Bitcoin

One of the strangest market stories this year has nothing to do with tech stocks or crypto, it’s cocoa.

Global cocoa futures have surged more than 150% year-on-year, hitting repeated all-time highs as crops in Ghana and Ivory Coast suffer from disease, ageing trees and extreme weather. The Financial Times reports that West Africa’s harvest has fallen to its lowest level in decades, creating a supply crunch so severe that futures briefly reached over $10,000 per tonne[1].

The volatility has become so wild that analysts have started comparing cocoa to Bitcoin and surprisingly, cocoa is winning. Several markets commentators noted that cocoa has outperformed BTC this year, with sharper rallies and more violent swings driven by pure supply fundamentals rather than speculation[2][3]. Business Insider even described cocoa as 2024’s “hottest commodity,” pointing out that hedge funds are piling in as traditional producers struggle to keep up[4].

Manufacturers across Europe are shrinking chocolate bar sizes or raising prices quietly (shrinkflation) that’s expected to intensify heading into Easter 2026. Stock up on chocolate everyone.

Editors: Liam Sanderson, Dinel Gamage

Writers: Liam Sanderson, Filip Wang, Cleo Vuillot, Harshil Nichani

References:

Economics:

[1] Nature - https://www.nature.com/articles/d41586-025-03364-2

[2] The Nobel Prize - https://www.nobelprize.org/prizes/economic-sciences/2025/press-release/

[3] The Guardian - https://www.theguardian.com/business/2025/oct/13/nobel-economics-prize-technology-joel-mokyr-philippe-aghion-peter-howitt

[4] NY Times - https://www.nytimes.com/2025/10/13/business/nobel-prize-economics.html

Business:

[1] FT – https://www.ft.com/content/oil-output-cut-2025

[2] Bloomberg – “London fashion brand sets 2027 recycled fabric target” – https://www.bloomberg.com/news/articles/fashion-recycling-2027

[3] FT – “Mortgage applications rise as rates stabilise, first‑time buyers return” – https://www.ft.com/content/mortgage-applications-2025