Why Better Leadership, Not Better Conditions Will Drive Growth in 2026

The Chancellor’s recent Budget did little to ease the pressure on organisations. While the headline measures focused on individuals, the ripple effects for employers are already being felt: government-mandated increases to the minimum wage are pushing up employment costs, compressing pay bands, and raising the overall cost base for many organisations. This comes after the previous Budget’s rise in employer National Insurance contributions, a double impact that will leave businesses absorbing significantly higher people-related costs in 2026 at a time when margins are already under strain.

There were no major pro-business incentives, no new levers to lighten that load, and no signal that conditions will become easier in the short term.

But this clarity is, in itself, important.  It confirms that external conditions are unlikely to be the source of relief or growth next year. If businesses want to move forward in 2026, it will not be because the environment has improved, it will be because leadership has.

Across the organisations we support, a clear pattern has emerged. The pressure of the last 18–24 months has pushed many leaders into survival mode. Decision-making has become narrower. Communication has become inconsistent. And, in some teams, the strain has exposed behaviours that are not simply unhelpful - they are actively eroding performance.

Most concerning is the rise of toxic or unchecked behaviours at C-suite level. Under pressure, some senior leaders are displaying impatience, defensiveness, dismissiveness, and in extreme cases, hostility. These behaviours cascade quickly. When left unchallenged, they become normalised, and once that happens, they don’t just damage culture; they put a hard ceiling on future growth.

High performers are always the first to check out, quietly disengaging, stepping back, or planning their exit long before the organisation realises what has been lost. Middle managers retreat, cultural confidence fractures, and momentum stalls.

Leaders need to have the courage to remove toxic people regardless of how ‘business critical’ their roles are perceived to be. Keeping someone in post because they hold key information, long-standing relationships, or positional power may feel commercially safest in the short term, but it is deeply destructive over time.

Toxic behaviour in a senior role is never contained; it spreads through decision-making, communication norms, and team dynamics, ultimately compromising the wellbeing, performance, and retention of everyone else. And when teams can clearly see the behaviours but also see that nothing is being done about it, it sends a louder signal than any leadership message ever could: if we can see it, why is nothing being done? Once that question takes hold in a business, trust erodes quickly and the cultural damage accelerates.

The Invisible Cost of Leadership Under Pressure

When leaders are exhausted, overloaded, or operating reactively, it shows. We are seeing:-

• Short tempers replacing curiosity
• Instructions replacing coaching
• Scrutiny replacing support
• Siloed decisions replacing collaboration
• Over-promising replacing honest dialogue

None of this is intentional. But the impact is real. Employees feel disconnected. Middle managers feel squeezed. High performers question their future. Cultural norms start to drift, and all of this is happening at the very moment organisations need unity, focus, and clarity the most.

This Year Has Been Hard - And We Need to Acknowledge That

One of the most striking findings from the work we’re doing right now is just how emotionally fatigued teams are. For many, 2024-2025 has felt like an unbroken run of demands, restructures, squeezes, and shifting goals.

People are tired. Not in a transient “roll on Christmas” way, but a deeper, cumulative fatigue that affects the way they think, engage, and perform.

What employees are responding to is not optimism for optimism’s sake, but truthfulness. The days of “keep going, it’ll get better soon” are gone. Statements like that now feel hollow, even disrespectful, when people know how difficult the environment really is.

Leadership accountability starts with acknowledgement. Not doom, not drama, simply recognising the load people have carried. When leaders do that well, teams don’t disengage. They reconnect.

2026 Provides An Opportunity, But Only For The Prepared

Next year will reward organisations that do one thing exceptionally well: build leadership environments where people can think clearly, work effectively, and perform at their best - particularly under pressure.

In other words, leadership needs to shift from “managing the business” to enabling the business.

We are coaching and developing leaders who are leaning into:-

• Radical clarity - removing ambiguity, making priorities unmistakable
• Evidence-based decision-making - not reacting to noise, but interpreting signals
• Human-centred conversations - acknowledging pressure and creating psychological breathing space
• Consistency of behaviour - modelling the culture they want, especially when it’s hard
• Accountability with empathy - holding standards without pushing people over the edge

These leaders are already seeing green shoots: higher engagement, more ownership across teams, better commercial decisions, and less rework and friction.

None of this requires a softer world, only better leadership within it.

If We Want Growth, We Cannot Wait for Conditions to Improve

The most successful organisations in 2026 won’t be those who “weathered 2025”. They will be the ones who transformed the way they lead because of 2025.

Waiting for economic tailwinds is no longer a strategy, recycling old leadership habits is no longer effective and avoiding tough conversations is no longer benign - it’s costly.

• The organisations that thrive next year will be those whose leaders: -
• Take responsibility for the environment they create
• Understand the emotional reality their people are carrying
• Reset expectations with honesty and purpose
• Rebuild trust through behaviour, not rhetoric
• Develop the capability to coach, influence, and align at scale

Authentic Leadership Starts Now

Authentic leadership is not about inspirational speeches. It is about behaviour that matches the moment. For leadership teams, that means: -

• Acknowledging reality without catastrophising it
• Re-anchoring the business on what matters most
• Supporting managers to coach, not merely supervise
• Rebuilding cultural confidence one conversation at a time
• Actively shaping the conditions for high performance

We are seeing organisations make this shift and the difference is tangible. Morale rises and decision quality improves. Teams reconnect with their sense of purpose and performance begins to stabilise and then grow.

Optimism Comes from Capability, Not Circumstance

The UK’s economic outlook may be mixed, but that has never been the defining factor in organisational success. Capability is. Culture is. Leadership is.

If leaders can evolve quickly, and many are, 2026 can be a genuinely strong year. Not because conditions magically improve, but because organisations choose to.

And that is the heart of the opportunity.

Growth is not being handed out. It will be earned by the companies with the strongest, most capable leaders.