Confidence is falling, costs are rising and a Chancellor with little room to move is due to speak on 28 October

UK Budget 2026: What London Businesses Are Worried About

There is a mood that descends on the British business community in the weeks before a Budget. It is the mood of a household waiting for the boiler engineer. Something expensive is about to be announced and nobody knows quite what.

We are in that period now. A daily bulletin for businesses, published on 1 October, sets the scene in its opening line: confidence is down, energy and fuel are dearer, lending has slowed and markets begin the final quarter under strain. It notes that the Budget is on 28 October, that the government is balancing spending ambitions against rising borrowing costs and limited fiscal room, and that the Chancellor has reiterated his commitment to the fiscal rules.

The Squeeze

Translated from Treasury, the position is this. The government has promised things that cost money. It has also promised to follow rules limiting how much it borrows. The cost of borrowing has gone up. So the space between the two promises is narrow, and one way to widen it is tax.

Businesses know this. Which is why every trade body in the country has spent the past month publishing a letter explaining why its members in particular should be spared.

What Firms Are Facing

The same bulletin lists the pressures. Energy and fuel costs are rising again. Lending to businesses has slowed. The housing market is softening, with prices and transactions down, which the bulletin notes can flow through to construction, trades, furnishings, professional services and other small firms that depend on property activity.

Anyone who runs a business in London will add their own. Rents. Wages, which have risen with the minimum wage. Employers’ National Insurance. Business rates.

The View From a High Street

I live near a parade of shops in north London of the sort estate agents call “vibrant.” There is a butcher, a bookshop, two cafes, a hardware shop that sells everything, and a rotating cast of ventures in the unit on the corner. I do not claim they are a scientific sample. I walk past them daily, and the corner unit, like corner units everywhere, changes hands more often than is comfortable.

The owners of places like these do not follow gilt yields. They follow the electricity bill and the footfall on a wet Tuesday. For them, a Budget is not about fiscal rules. It is about whether one specific cost goes up in April.

Business Rates, Again

The tax that comes up most is business rates, the property tax paid by shops, pubs, offices and other premises. It is levied on the value of the building, not on profit, so a struggling shop pays the same as a thriving one next door.

The complaint is long-standing. Ahead of last year’s Budget, as a report on retailers’ demands recorded, the industry’s trade body argued that any reform must ensure no store pays more, and warned that proposals to raise rates on larger properties could put as many as 400 big stores at risk of closure. Successive governments have promised fundamental reform. Successive governments have adjusted the reliefs instead.

In London the issue bites harder than elsewhere because property values are higher. A small shop in Zone 2 can face a rates bill that would be unthinkable in most of the country.

The Other Side

It is only fair to give the Treasury’s case. Business rates raise a very large sum that helps pay for local services. They are hard to avoid, since a building cannot be moved offshore. Any cut must be paid for by another tax or by less spending. And the public finances are in a condition where giveaways are difficult to justify.

There is also an argument that some of what is blamed on tax is really about landlords. When rates fall, rents often rise to absorb the saving. The shopkeeper is no better off.

What Might Happen

I have no inside knowledge and would distrust any columnist who claimed some. The pre-Budget weeks are full of kite-flying, in which ideas are floated in the newspapers to see who screams. Most never appear.

What can be said is what the constraints imply. The Chancellor needs revenue. He has reaffirmed the rules. He will want to avoid anything that frightens the bond market, which had a nervous week. And he will be mindful that businesses were asked to bear a good deal in recent Budgets and are saying, loudly, that they cannot bear more.

Confidence

The word in that bulletin that struck me was confidence. It is the least tangible thing in economics and one of the most important. A firm that expects better times hires and invests. One that expects worse sits on its hands. Uncertainty itself is a cost.

This is the hidden price of the pre-Budget season. For a month or more, decisions are deferred. The new van is not ordered. The extra member of staff is not taken on. Everybody waits for the engineer.

What I Would Like to See

Speaking only for myself: a Budget that is boring. Clear, costed, without surprises, and with a plain statement of what will not change for the next few years. Businesses can plan around almost any tax if they know it is coming and that it will stay put.

I do not expect to get it. I shall be watching on the 28th with a notebook and a strong cup of tea, and I shall report back.

In a Lighter Vein

Budget day has its own traditions of comedy. The London Prat keeps them up in its English satirical news on Budget day and UK satirical news about the Treasury. You will find my other pieces on London business there. Bohiney Magazine covers Washington’s version.

SOURCE: https://bohiney.com/