The trends, challenges and opportunities shaping Herefordshire & Worcestershire’s business landscape – and the mindset that will define success

If the last few years have taught us anything, it’s that business can’t afford to wait for perfect conditions. Firms across Herefordshire and Worcestershire have traded through a pandemic, geopolitical shocks, supply chain turmoil, inflation, labour shortages and a relentlessly rising cost base – and they are still here.

That endurance is no small thing. It speaks to a business community that has been tested harder and for longer than almost any period in recent memory, yet continues to adapt, improvise and push forward. And heading into 2026, the local mood is shifting. Pressures remain, but the instinct to pause is giving way to a desire to plan, invest and act.

That balance of realism and optimism is captured clearly by Sharon Smith, Chief Executive of Herefordshire & Worcestershire Chamber of Commerce, whose reflections set the tone for the year ahead. “Looking back at this year, it can only be reported to have been another difficult year for business,” she says. Brexit, the war in Ukraine, the cost-of-living crisis, global shocks all have left their mark. And yet, as she notes, “despite the challenges, businesses in my experience are consistently resilient and forward-thinking.”

This is the central narrative emerging for 2026: resilience strengthened by pragmatism, and confidence grounded in action rather than assumption.

A new kind of confidence
Sharon has watched the region absorb wave after wave of disruption. “You’re hit with something, hit with something, hit with something else,” she reflects, yet firms have adapted, regrouped and found new routes to progress.

But resilience has also bred caution. Uncertainty has delayed investment and slowed decision-making, while rising energy, labour, materials and tax costs continue to squeeze margins. Planning and regulatory inconsistencies across boundaries add friction for firms that operate regionally.

And still, Sharon’s view is emphatic: realism must not turn to resignation. “You can’t wait… next year you’ve got to do what you can do within what you can control.”

This mindset – control the controllables – is increasingly visible across the region. Businesses want stability, but they are no longer waiting for certainty. They’re creating it where they can.

A national landscape of stability (even if imperfect)
The Government’s Budget and the OBR’s latest Economic and Fiscal Outlook don’t deliver sweeping transformation, but they do offer something that has been in short supply: predictability. A high-cost, high-tax environment is far from ideal, yet the absence of sudden shocks gives companies space to think beyond the next quarter.

That matters for Herefordshire and Worcestershire employers weighing up investment in people, technology, wages and capital assets — decisions that have been on hold for too long.

The British Chambers of Commerce’s 2026 policy priorities echo the challenges raised weekly by local firms:
simpler exporting
better planning capacity
stronger digital foundations
accessible skills pathways
practical support to adopt AI
Together, these form a platform for a business environment that is stabilising, but still demanding — hopeful, but not yet comfortable.

Skills: The decisive factor
No issue dominates local conversations like people. As Sharon explains: “Both large and small businesses in many sectors report that an ageing workforce is causing them some challenges… businesses are finding it hard to recruit a younger generation with the right skills.”

Recent UK Shared Prosperity Funding, targeted at upskilling in both counties, proved something important: the appetite for training is strong – cost, not willingness, is the barrier.

Longer-term, higher-level training remains a sticking point. The Government’s planned reform to a Growth and Skills Levy is a welcome step, but delivery will be crucial.

Skills, however, are not just technical. Employers are recruiting for adaptability, mindset and transferable capabilities. In return, staff want flexibility, development pathways and meaningful work.

Gen Z, Sharon argues, is reshaping workplace expectations – and hopefully for the better.

“It’s exciting to see how Gen Z’s prioritisation of fairness and strong social and environmental values will deliver economic growth.”

The challenge – and opportunity – is blending experience with new thinking to build a more innovative, values-driven workforce.

AI, productivity and the SME advantage
If skills are the foundation, technology is the force multiplier.

AI now sits at the heart of that conversation. “The adoption of AI is undoubtedly on the rise,” Sharon says, and she is right: 2025 was the year AI entered the conversation; 2026 is the year it enters the workflow.

Back-office automation. Smarter customer service. Data-powered product design. Faster decision cycles. The divide is no longer between big and small firms – it’s between those adopting digital tools and those standing still.

For SMEs, this is transformative. AI is becoming a “productivity superpower,” turning resource constraints into innovation catalysts. But the risks are growing too: cybersecurity threats, supply chain fragility and misinformation are all intensifying, requiring vigilance and preparedness.

Costs, certainty and the investment question
Cost pressures remain relentless. “Increased costs have remained a burden on businesses throughout this year,” Sharon notes, from Employer NI and National Living Wage rises to energy, materials, food prices and business rates. Revenues may be growing, but profits are not.

The most important thing government can offer now is stability. Businesses will invest when they trust that today’s decisions won’t be undermined tomorrow.

The power of place
Perhaps the most striking transformation since Covid has been the resurgence of local collaboration.

“Businesses continue to have great pride in local partnerships and collaborating,” Sharon says. Purpose-led work, B Corp principles, social value and stronger third-sector partnerships are all supporting healthier, more community-anchored business models.

“The irony is that difficulty globally and nationally actually creates more strength locally.”

Local networks have become strategic assets in a volatile world.

2026: Practical optimism
Success this year will not mean the absence of challenge. It will mean:
-more firms shifting from wait-and-see to test-and-learn
-investment in people alongside clearer expectations
-wider, more confident use of AI in everyday workflows
-firmer foundations for export and innovation
-stronger local coalitions turning intent into impact

Or, as Sharon puts it simply: “Businesses will continue to push forward and create their own opportunities.”