High stakes and new priorities: Why the 2026 budget could be the turning point SMEs need
With a new prime minister and Cabinet, comes a new set of priorities. Ahead of this year’s Autumn Budget, Ed Rimmer, CEO of independent SME lender Time Finance, shares his thoughts on the necessary measures for business growth.
Burnham’s new government has announced a string of new measures from regional devolution to investment in apprenticeships, public transport and social care. There has even been a notable change to how it communicates its policies with the public through a dedicated commitment to social media use.
The prime minister has promised to honour Labour’s 2024 manifesto pledge to not increase VAT, income tax or employee NI, and while this will be welcome news to many seeking stability and reassurance, these account for almost three-fifths of UK taxation. Where the government plans to pull its funds to create fiscal headroom is yet to be determined, and if public tax isn’t going to rise, many businesses will be feeling nervous about what that means for them.
With this Budget, the chancellor needs to look at building in fiscal headroom while taking a three-pronged approach to appease the British public. It will need to address defence spending amidst an increasingly uncertain geopolitical picture, improve the cost of living for everyday people, all the while not worsening conditions for businesses in the process. Balancing all three will be no mean feat.
Tax reforms under the microscope
Live music venues and pubs in England welcomed a 20% business rate reduction this summer, which arguably shows where Burnham’s government is dedicating its efforts. It has recognised the detrimental impact some taxes are having on certain industries. But the strain felt by the tax system is not only felt by one industry. This year, UK Finance’s SME Finance Monitor* revealed the top barriers to doing business, and nearly 50% of SMEs (with 10 or more employees) cited ‘current levels of taxation’ as the main issue.
As overheads remain high and the energy price cap is expected to rise 4% from 1 October, businesses will be looking at the Budget and hoping for some kind of tax reform or relief. Many have asked the question of whether or not this 20% reduction for hospitality businesses may be extended to other industries, or, better still, an overhaul of the business rates system completely to better suit the needs of modern businesses. An overhaul like this could act as a real turning point for UK SMEs and their outlook on the future.
What’s clear from Burnham’s initial approach to leadership is that putting extra pounds in the pockets of everyday people is a key strategy. While businesses may be unsure of what lies ahead for their finances, one area of the Budget that may help to stimulate growth is consumer spending. If consumers are feeling better off about their finances, with little or no increases made to their tax contributions, the hope from many businesses is that they may be more inclined to spend as a result, which would, in turn, boost the economy.
Regional devolution: Unlocking power or widening divide?
Regional devolution is a double-edged sword for millions of businesses currently navigating high overheads, operational costs and extremely tight margins. Empowering Metro Mayors to prioritise infrastructure, skills funding and strategic investment is a positive shift, but it remains to be seen whether greater control over local funding will drive long-term localised growth. Crucially, businesses fighting for survival cannot afford a postcode lottery of fragmented business rates, localised tax variations or administrative red tape.
Shifting more power out of Westminster could create additional friction for regional businesses that are already stretched to their limit, and devolution will only be a force for good if combined authority leaders resist viewing local commercial sectors simply as revenue targets. That said, councils are often much better equipped to understand the nuances of their beloved cities, what its people and its businesses need, and this could actually be the ticket to success for many. If it can effectively stimulate regional consumer spend, local businesses will be first to reap the rewards.
Beyond the tax headlines, the ultimate success of Burnham’s first budget hinges on whether it can successfully instil businesses with the confidence they need to move from cautious survival to active investment, something that’s vital for both individual business growth as well as the wider economy. Across the UK, SMEs are feeling the weight of sustained cost pressures, and their overheads will all be front of mind this October as the Budget is announced.
And if the government can enable cash flow to effectively run through the economy by stimulating consumer spending, there could well be a light at the end of the tunnel for businesses this autumn.
*SME Finance Monitor 2026, UK Finance (2026).