News and Insights

It’s an every-little-helps budget, but what does it mean for business

October 28, 2026

In this blog, we discuss:

The key highlights of the 2026 budget, and how it reflects the government’s short-term and long-term political and economic goals
How the predominant focus on the cost of living means that implications for business are relatively limited, even with changes to banking taxes, business rates, and the High Street
The market’s reaction so far – or the lack of it.

Chancellor John Healey today delivered his first budget, Labour’s third since coming to office in 2024. In its four months so far, Andy Burnham’s government has certainly not lacked in ambition and has outlined its vision in a number of areas – Europe, devolution, energy, health and care to name a few.

This budget, though, does not answer any of these big questions – focusing primarily on the cost of living – and although there were some announcements around corporate tax and the minimum wage, impacts for business are likely to be relatively limited.

Growth is stronger than expected, but inflation is the real problem

As all budgets must do, it began with an assessment of the macroeconomic situation and a commitment to fiscal discipline. Borrowing will be higher than forecast back in March, even if economic growth will be a little stronger than expected this year. But the Office for Budget Responsibility has sharply increased its forecasts for inflation, which owes to the effects of the conflict in the Middle East.

The actions the government is taking to combat inflation was the key theme of this budget. The government has pulled on the various levers it controls to deploy what the BBC called “a flotilla of small measures” designed to offer the public breathing space – a term which the government has clearly decided to build its messaging around.

A two-track budget

In a sense, this budget operates on two tracks. In the short-term, immediate measures such as an increase in the minimum wage and one-off payments to help with energy bills will be welcomed by the public. But ultimately, no government can control the cost of living on its own, and for a Prime Minister committing to tackling it is risky – as Rishi Sunak and Keir Starmer both found out to their peril.

Long-term, this budget served to telegraph the direction that the government wants to move towards on managing the welfare bill, adjusting the triple lock on pensions, increasing investment on defence and setting up a national care service. But detail is still lacking on all of these major themes, and it was not forthcoming in today’s speech.

The more fleshed out of the government’s strategic priorities was fiscal devolution, where the Chancellor had a number of significant announcements to make around devolving business rates to local authorities and handing over a portion of income tax to mayors in 2028.

The City reacts – or not

Overall, there has been little market reaction to Healey’s statement. Gilt yields are marginally below where they were at the start of the speech and the pound has remained resolute, standing at $1.33. The market is broadly content with what is being seen as a “dull” budget.

Banks have been hit by an additional levy of 3%, but they were relieved that it was not higher. Indeed, bank stocks rose, after many had expected the surcharge to corporation tax to return to 8% at which it stood before 2023.

This analysis is accurate as of 15.30 on 28 October – two hours after the budget speech ended.

Here are a few of the headline announcements in more detail:

Tackling the cost of living

The minimum wage rises by 3.9%, taking the National Living Wage to £13.21 an hour and the National Minimum Wage for 18-20-year-olds to £11.27.
Around 20 million households in council tax bands A to D will receive a £100 energy payment, costing an estimated £2.6bn. The government’s own website crashed as people rushed to check which band they fell into.
The fuel duty freeze is extended through winter and spring to July, marking the 16th consecutive year without an increase. The planned rise next year has been shelved to ease pressure on motorists facing higher petrol and diesel prices.

The High Street

Business rates cuts are extended to a higher threshold, bringing more high street businesses into scope for relief.
Gambling companies face higher taxes to help offset the cost of other measures, although the market reaction suggests investors believe the overall package is less severe than anticipated.

Financial services

The bank surcharge rises from 3% to 6% for 15 months from January, rather than returning to the 8% level at which it operated before 2023. The temporary increase is lower than some City expectations.
The planned reduction in the Cash ISA allowance from £20,000 to £12,000 is scrapped, leaving the current allowance unchanged.
Tax on income from property and savings rises by a further two percentage points from April 2027, on top of the increase announced last year.

Corporate tax

A Founders’ Relief on corporate tax of 10% will encourage start-ups, although a technical consultation will iron out the details first. It appears that relief will be capped at £10m – which is substantial.

Fiscal devolution

Local authorities will retain 20% of business rates from next year, rising to 100% by the end of the decade.
From 2028, a portion of income tax will be allocated to mayors.
The government aims to reduce duplication between national and local government as part of its wider approach to devolution.

Investment in competitive industries and net zero

There were investment announcements, including support for a new Rolls-Royce plant and the life sciences industry.
The government maintains its commitment to net zero by 2050, with measures including improved grid connections and a competitiveness scheme intended to support investment.

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Frequently Asked Questions:

What were the key announcements in the 2026 UK Budget?
This was an every-little-helps budget, focused squarely on the cost of living. The headline measures were a 3.9% rise in the minimum wage, a £100 energy payment for around 20 million households and a fuel duty freeze extended to July. Beyond that, there were changes to the bank surcharge and business rates, a push on fiscal devolution and a new Founders’ Relief for start-ups.

What does the 2026 Budget mean for business?
Less than you might expect. With the government’s attention fixed on the cost of living, the implications for business are relatively limited. High street businesses gain from extended rates relief and start-ups from a 10% Founders’ Relief. Gambling companies and banks pick up more of the bill.

How does the 2026 Budget affect banks?
Banks have been hit, but not as hard as many feared. The surcharge rises from 3% to 6% for 15 months from January, rather than returning to the pre-2023 level of 8%. The relief showed: bank stocks rose.

What is the National Living Wage from 2027?
The minimum wage rises by 3.9%, taking the National Living Wage to £13.21 an hour and the rate for 18 to 20-year-olds to £11.27. It will be welcomed by the public, but the government cannot control the cost of living on its own.

What is fiscal devolution and how will it work?
It was the most fleshed-out of the government’s strategic priorities. Local authorities will keep 20% of business rates from next year, rising to 100% by the end of the decade. From 2028, mayors will also receive a portion of income tax.

How did the markets react to the 2026 Budget?
Barely. Gilt yields ended marginally below where they started and the pound held resolute at $1.33. The market is broadly content with what is being seen as a “dull” budget.

POSTED BY: James Brockdorff