As we move into the second half of 2025, it’s an appropriate time to pause and reflect—not just on how far we’ve come, but on how well our start-of-year forecasts have stood up to reality. At the turn of the year, we outlined five major forces likely to shape 2025: monetary policy, EV adoption, global trade disruption, digital transformation, and the recalibration of private capital. While much of that thinking remains broadly valid, a critical lens reveals where our assumptions need refinement—and where events have progressed faster or slower than we imagined.

Monetary Policy: The Pivot That Never Fully Came

We entered the year expecting rate cuts to begin mid-2025, driven by falling inflation and stagnant growth. That call wasn’t wrong, but the timeline has proved less forgiving. Inflation has been more persistent, particularly in the services sector, where wage growth and energy inputs have been stickier than central banks hoped. The Bank of England and the Fed have edged towards easing, but the pivot is slower and more cautious than our base case assumed.

In retrospect, we were too quick to assume that the inflationary impulse from COVID-19 and the war in Ukraine had entirely dissipated. Instead, we now see a new cycle of cost pressures emerging from geopolitical frictions and policy-driven market distortions, particularly tariffs and the reshoring of supply chains. Our mistake wasn’t directional, but rather in underestimating the resilience of structural inflation and the political forces that reinforce it.

The EV Transition: Tipping Point or False Summit?

Our January forecast confidently called 2025 a landmark year for electrification. And on paper, it is: EV registrations have overtaken ICE for the first time in the UK, and the Chinese OEM wave continues to reshape global supply chains. But under the surface, the picture is more complicated.

Fleet sales are driving most of the growth, not retail buyers. Consumer resistance remains high due to high insurance costs, inconsistent charging infrastructure, and ongoing questions about resale values. We also assumed that regulatory clarity would unlock confidence. Still, the reality is that incentives remain patchy, and in some cases (e.g. the ZEV mandate), they’ve created confusion as much as momentum.

The most significant learning is that the EV transition, while inevitable, is not linear. Our assumption of an irreversible tipping point underestimated the drag created by affordability gaps, policy uncertainty, and consumer hesitation. The direction of travel hasn’t changed—but the road is bumpier than we projected.

Global Trade: A Shock That Escalated Faster Than Expected

At the start of the year, we flagged growing trade tension as a likely headwind, particularly between the US and China. What we didn’t fully anticipate was the speed and severity with which tariffs, industrial policy, and retaliatory measures would ripple through global markets. The reintroduction of 20–25% tariffs on a range of automotive goods—including EVs and parts—has already impacted UK-based manufacturers exporting to the US. JLR, Bentley, and others have had to rethink their supply chain footprint in real time.

We expected disruption; we did not expect this level of strategic realignment by midsummer. The assumption that the UK could maintain a neutral position, benefiting from both US and EU alignment, now appears fragile. The lesson: trade wars no longer escalate slowly. They are immediate, profoundly political, and structurally distorting.

AI & Digitalisation in Automotive: A Quiet Evolution, Not a Revolution

One of our stronger convictions in January was that AI would start to transform automotive retail, particularly in operations, marketing, and service workflows. While there are clear signs of progress, it’s more incremental than transformative. AI-enabled marketing tools, service diagnostics, and back-office automation are gaining traction, but most dealer groups remain in early pilot phases.

Here, we may have overestimated cultural readiness. Many operators remain cautious, wary of data quality, staff resistance, and unclear ROI. The opportunity remains vast, but the adoption curve is shallower than we expected. In future forecasts, we’ll apply more scrutiny not just to technological capability, but to the change management required for actual implementation.

Private Capital: A Cautious Recovery With Pockets of Conviction

We entered 2025 expecting a more confident year for venture and growth equity, with the post-2021 overhang finally beginning to clear. That thesis is broadly held, but with caveats. Deal flow is returning, but it’s selective. LP appetite is recovering, but heavily biased towards experienced teams, capital efficiency, and clear exit paths. Growth-stage rounds are happening, but usually at flatter or down valuations—especially outside of AI and defence-tech.

We underestimated how reluctant LPs would be to take risks without immediate signs of commercial traction. The flight to quality is real, and narratives alone are insufficient. That said, we’re seeing a return of strategic investors, family offices, and international LPs to UK venture, especially where there’s a credible link to AI, climate or mobility.

Our call that private capital would rebound was not wrong, but it assumed a cleaner reset. What we’re getting is a more fragmented and rationalised market—arguably a healthier one in the long run, but not the volume rebound many hoped for.

Final Reflections

Our January framework was built around five foundational shifts. All five are playing out—but the contours have changed. Inflation has more staying power. EV momentum is less retail-driven. Trade wars are faster and messier. AI is real, but uneven. And private capital is coming back—but with sharper elbows.

If there’s a unifying lesson, it’s this: conviction must be coupled with humility. The direction of travel matters, but so does the friction. The second half of 2025 will be defined not just by adherence to trends but by how well founders, investors, and operators respond to the volatility embedded in every step forward.

Have a great week.