What are UK CEOs doing to cut costs in 2026?

UK business leaders are turning to AI, upskilling, Gen Z talent, and shifting to flexible workspaces to cut costs amidst economic headwinds in 2026, new research has revealed.

International Workplace Group (IWG) has released its annual CEO Index, which gauges economic sentiment and business priorities among more than 1,000 UK business leaders. The CEO Index found that most are rethinking their real estate strategies, including how and where they operate as cost pressures continue into 2026.

Virtually all (99%) said that cost-cutting would be critical to business success following a mixed outlook on the health of the economy, while separate research globally has shown that CFOs are trimming budgets by an average of 10%. Just over half of CEOs (54%) now describe the economic outlook for 2026 as strong, compared with 70% who expressed optimism about the business environment in last year’s survey.

2026 is emerging as the year of “work from an office, not the office”. Companies of all sizes are seeking greater flexibility and lower costs by empowering teams to work from a network of professional workspaces with locations throughout the country, including in the suburbs and even rural areas. Three in ten CEOs (29%) said they are adopting flexible workspace solutions as a way of cost-cutting amid the uncertain economic environment. This reflects findings in a separate report by IWG and Arup which show that companies that adopt a hybrid working model and adopt flex space instead can cut real estate costs by up to 55%.

Investment in AI to drive efficiencies

Almost three quarters (73%) say investing in digital and AI skills across the entire workforce will be integral to business success in 2026, with nearly half (46%) using AI and digital tools to automate routine or manual tasks as part of their cost-cutting plans. In fact, eight in 10 (80%) CEOs say the combination of hybrid working and use of AI is already driving productivity in their business. Indeed, IWG has named the rise of AI as a work co-pilot a key trend in 2026, with more hybrid teams regularly integrating AI copilots into their daily operations.

Focus on upskilling employees and hiring Gen Z early-career talent

Upskilling the existing workforce, rather than hiring in specialist talent, is seen as a key way to save costs by 77% of those questioned. Alongside this, two thirds (66%) of UK CEOs say hiring younger talent has helped them navigate economic pressures, while 63% report direct cost savings as a result.

More than one in five CEOs (21%) plan to hire more early career or early-career or Gen Z employees in 2026, specifically to save costs and upskill their people. Upskilling is seen as a more cost-effective approach than hiring specialist talent by more than three quarters (77%) of CEOs.

Flexibility will remain key in the race for top talent

Flexibility has emerged as a critical tool for maintaining employee satisfaction. A third of CEOs (33%) plan to expand hybrid, remote or flexible working models to both reduce costs and keep their workforces happy.

Hybrid working remains one of the most in-demand employee benefits when it comes to attracting and retaining top talent. Almost seven in ten (68%) say it broadens access to younger and more diverse talent pools, while the same proportion say it has helped them attract and retain the best young talent. Alongside these recruitment benefits, almost nine in 10 leaders (88%) report improved employee happiness and wellbeing since adopting hybrid working.

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The 2026 CEO Index findings mirror the rapid network growth IWG has been experiencing, with 2025 marking a transformative year for the business. IWG signed its 5,000th location, achieved record revenues and added around 1,000 locations in a single year. Over 95% of these were signed under IWG’s partnership model, with more locations added in 2025 than in the company’s entire first 15 years of operation.

“What we’re seeing from UK CEOs is not short-term belt-tightening, but a structural rethink of how and where their business operates, harnessing the latest technology,” said Mark Dixon, CEO and Founder of International Workplace Group plc. “Leaders are cutting costs by being smarter – opting for flexible, lower-cost suburban and rural office locations, investing in younger talent and upskilling from within, alongside unlocking the power of AI which is already transforming how companies and their people work.

“Business leaders are rapidly understanding that by reducing daily, costly commutes to faraway offices and empowering people to spend more time working closer to where they live and want to be, they can cut costs, maximise productivity, increase employee satisfaction and retention, and drive better ROI”.