Budget 2026: Five themes business leaders need to watch

A Thinking Business publication

On Wednesday 28 October, UK chancellor John Healey delivered his first budget, reflecting the priorities of new prime minister Andy Burnham. Characterising the autumn statement as a ‘breathing space’ budget, Healey unveiled a series of targeted measures that he hoped would give businesses temporary relief from current challenges, while also setting the scene for more fundamental policy shifts moving forward.

Envisaging a new growth model based on devolved power, an active state, targeted support for entrepreneurs and private capital partnering with strategic public finance, here are the five budget takeaways for business leaders.

1. Devolution is no gimmick and a meaningful transfer of powers is coming

Devolution is one of the biggest themes in the budget for business, as it sets out a timetable for a 20% share of business rates to be locally retained by mayors by 2027 and some income tax assignment from 2028. There is an intention that local and regional government will retain 100% of business rates income by the end of the decade, with a first wave of business rate retention zones identified to include London, Greater Manchester, Liverpool and the North East.

Several smaller measures mark first steps in a long-term devolution roadmap the government is clearly committed to, and which has bipartisan support. These include powers for strategic authorities to introduce an overnight visitor levy, a £1.5 billion borrowing facility for mayoral strategic authorities from April 2028 and £150 million of capacity and capability funding for strategic authorities in 2027-2028.

Amardeep Gill, partner and national head of public sector at Trowers, says: “Economic growth remains firmly on the agenda and this government looks at growth through a place-based lens. The budget gives a big indication of what this government stands for, and that is a fundamental redistribution of economic decision-making to local mayors and strategic authorities so that they are in control of certain levers of economic change.”

2. A shift to the regions will transform how businesses interact with government

The Fiscal Devolution Roadmap set out in the budget signals a shift towards empowering regional bodies with both the resources and the powers to make change. That also opens up the ability for businesses to engage with decision-makers locally, helping particularly small and medium-sized businesses to understand and influence things like transport, skills and infrastructure spending.

The budget also includes £285 million of transitional funding for Good Growth Funds in 2027-28, intended to align mayors, public financial institutions, pension funds and private capital around local priorities.

Gill says: “For businesses, this calls for a shift in how people think about their relationships with government. Business leaders now need to look beyond procurement relationships and see an opportunity to create real strategic partnerships. It is going to become increasingly important to understand the local priorities and feed into those, with mayors also having a responsibility to create the right forums to bring people into those conversations.”

3. The government is open to listening more

While the chancellor was heavily constrained in his ability to offer tax giveaways or spending hikes, by both the fiscal rules and the high national deficit, he did deliver a budget that attempted to show he is listening to business.

The tax measures in the budget were pretty limited in their ability to stimulate economic growth, but the aim was to enhance stability, which every business wants. Nathan Williams, a corporate tax partner at Trowers, says: “In some ways this budget was notable for what it did not do: there was no wealth tax, as had been mooted, and no move to align capital gains tax rates with income tax rates.”

For employers, hit hard last year when employer national insurance contribution rates were increased, there was also some signs of relief. “It does appear that the government has been listening to employers on rising business costs,” says Nicola Ihnatowicz, partner in the employment practice at Trowers. “The minimum wage for younger workers did not go up as much as had been anticipated – it felt like the government was aware of the challenges businesses are already facing and has slightly softened the impact of anticipated rises.”

4. New tax measures favour ‘innovation-led businesses’

The budget contains a few tax changes that indicate a strong (at least, on the face of it) but selective offer for entrepreneurs. From April next year, a new Capital Gains Tax Founders’ Relief will offer a 10% CGT rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative businesses. But at the same time, the lifetime limit for Business Asset Disposal Relief will fall from £1 million to £500,000.

Williams says: “The budget draws a new distinction between two types of entrepreneurship, with generous treatment for the founders of innovative, high-growth companies. The conditionality around the new Founders’ Relief, and that definition of qualifying high-growth, innovation-led businesses, is out for consultation but it is quite tight so query how successful it is going to be in encouraging founders and helping promising firms scale and remain in the UK.”

Several other measures announced in the budget aim to help encourage founders and scale-ups, including a simplification of venture capital schemes and R&D tax relief administration, a new Young Entrepreneurs Allowance pilot, and a scale-up programme to support women founders.

Other notable tax measures announced include the VAT treatment of sales of real estate to affordable housing providers, changes to capital allowances rates and to employee share incentives under EMI and CSOP (to be repackaged as 'EMI2') arrangements.

5. Employers remain under intense pressure

The chancellor announced an increase in the National Living Wage of 3.9% to £13.21 an hour from 1 April 2027, though employers had likely already priced in that increase and will welcome the rate for 18- to 20-year-olds rising less than feared.

However, there was little to encourage businesses to employ more people or to ease the regulatory pressure that they are under following the introduction of the Employment Rights Act last year. While the government’s target is to reduce the administrative cost of regulation by 25% by the end of the Parliament, the launch of a new Better Regulation Executive is unlikely to do anything to relieve employment law burdens. Employment Tribunal claims are also on the rise. In Q1 2026/7 the number of single claims before the Tribunal was up 52% on the same period 12 months' earlier. Ihnatowicz noted "Claims are becoming more complicated and taking longer to deal with, which is another pressure on employers."

The budget does provide £100 million over two years to expand local apprenticeship services, as well as a £2,000 apprenticeship hiring payment for eligible employers.

But with the number of young people not in education, employment or training now close to a million, the government could be doing more.

Ihnatowicz says: “Employers are constantly looking for more expertise in technology and AI. As always with technological revolutions, employers are at the coalface, as are educational institutions, but the government is behind the curve. Anything that can be done to support the development of technology and AI skills would have huge benefits.”

The budget does commit more than £700 million to investment across AI security, capability and adoption, with an additional £60 million for a Sovereign AI Fund, including physical and industrial AI. But it does little to support workforce change.

Ihnatowicz adds: “That statistics on the numbers of workers over 50 that we are losing from the workforce are alarming, and that is accelerated by the pace of technological change. The ONS figures from last year showed more than 26% of people aged between 50 and 64 were economically inactive. If there was a way for government to better support the retraining and retention of those workers, whose skills and experience are so important, that would be welcomed.”