Autumn Budget – commercial credit industry reaction

Chancellor John Healey has announced his Autumn Budget plans. As part of a package to help business, Healey increased the point at which High Street shops in England start paying business rates from £12,000 to £18,000, with vape shops and adult gaming centres excluded from the relief.

The Chancellor has also announced an increase to the minimum wage, with a 3.9% increase to the UK’s National Living Wage and National Minimum Wage, taking effect in April 2027

Warren Abbey, CEO of 365 Finance, said “People need to be paid fairly. Inflation continues to rise, and energy costs are soaring just as winter approaches. But the government cannot give with one hand and take with the other – it is absolutely right that minimum earnings are driven up, but doing so without also supporting the businesses paying them is a flawed approach.

“Increases to minimum wage are most likely felt across retail and hospitality – two sectors already facing significant financial pressures, from National Insurance and business rates to energy bills and supplier prices. The danger of higher wages, if not introduced alongside other initiatives that improve trading conditions or alleviate their financial burden, is that businesses respond not by growing, but by postponing recruitment, reducing hours, or passing more costs on to customers.

“Businesses need tax systems that focus on profits, not flat costs, and trading conditions that allow them to invest in their own growth. After all, improving employees’ pay is only a positive if employers are willing and able to hire them.”

Sonia Jordan, R3 President and a Partner at Knights, said “The decision to lower business rates for hospitality businesses and provide additional rate relief for small businesses could be the difference between sinking or swimming for those businesses barely keeping their heads above water. This is particularly important given that 22,500 businesses fell into insolvency last year with small businesses especially affected. For hospitality firms, this support comes at an important point as they approach the crucial Christmas trading period.

“The additional funding for HMRC to carry out enforcement shows the government’s commitment to robust tax collection.

“However, we have concerns about today’s announcement requiring businesses to set up direct debits for VAT and PAYE liabilities. Direct debit can be a useful option for some businesses, but making it mandatory could put additional pressure on businesses by taking away their ability to manage and predict their short-term cashflow requirements.

“For businesses facing financial stress, automatic collection can undermine legitimate cash-management decisions while advice is obtained, emergency funding is explored, employees are paid or options are assessed. It could also accelerate a cash-flow crisis if it causes the business to breach the terms of its banking arrangements.

“HMRC already has preferential status for certain taxes and this could give them an additional advantage over other creditors when a business is approaching insolvency. In those times, directors are at high risk of unwittingly breaching their duties to the general body of creditors. Maintaining a choice of payment methods would better balance the need for effective tax collection with the practical and legal responsibilities of businesses directors and insolvency practitioners.”

Theo Chatha, Chief Financial Officer, Bibby Financial Services said “For small businesses up and down the country, this was a bare minimum Budget. Despite pockets of welcome news, much of what they need to thrive has not been delivered.

“Support for retail, hospitality and leisure businesses is needed. But the UK’s SME landscape goes far beyond those sectors. The manufacturers, construction firms, wholesalers, hauliers and service businesses that make up much of the SME economy are still facing a significant tax burden. They have been left on the same rate, overlooked once again.

“The rise in the National Living Wage and National Minimum Wage will support those who are struggling with the cost of living, and fair pay matters. But once again, this cost has been shifted onto SMEs. Businesses are still absorbing the 2025 employer National Insurance increase. Now they face yet another rise in the cost of employing people, with nothing in this Budget to help them carry it.

“The Government wants growth in every postcode. To get it, SMEs need relief on the cost of doing business and more confidence to invest. This Budget has done little to provide either.”

Tina McKenzie, National Chair of the Federation of Small Businesses (FSB), said “This Budget should have been the moment to help small businesses with the soaring costs holding them back, and the taxes restricting job creation. Instead, they got nothing to ease sky-high energy bills and nothing to make hiring someone more affordable, while the increase in business rates relief excludes too many.

“The Government has an ambition for growth in every postcode. Today’s Budget missed the mark on matching that ambition.

“Our latest research shows nearly half of small businesses (47%) expect their revenues to shrink in the coming months, while only around a fifth (22%) expect revenue growth. They are three times more likely to be planning to reduce headcount than increase it (18% versus 6%). There was nothing today anywhere near big enough to change that gloomy outlook.

“The increase in Small Business Rate Relief for small firms in retail, hospitality and leisure is welcome for those who will be lifted out of rates. FSB has campaigned hard for the threshold to be lifted for the first time since 2016, but it should have been applied much more widely. Small businesses blighted by the rates system aren’t just on the high street. Where was the help for the likes of manufacturers, small exporters, nurseries, office-based businesses and – in turn – the people they employ?

“Of the smaller measures announced, we’re pleased the Chancellor has acted upon our call to increase the Trading Allowance from £1,000 to £3,000. This will incentivise potential small business owners of the future to take the first steps to exploring a business idea, alongside the new Young Entrepreneurs Allowance. Parental pay rights for self-employed dads and partners is also a good step.

“We’ve been very pleased to see the Government adopt 14 out of the 15 recommendations from the Small Business Regulation Taskforce, which was co-chaired by FSB, including a reversal of the Companies House plan to make even the smallest businesses submit profit and loss declarations.

“The Chancellor acknowledged the risks and hard work involved in setting up and running a business, and building it across many years. It is incredibly unclear what difference his plans for founders’ relief compared to entrepreneurs’ relief, officially called Business Asset Disposal Relief, will make. The Chancellor must urgently clarify whether he intends to tax or back those who spend a lifetime running and growing successful businesses.”

Jonathan Geldart, Director General of the Institute of Directors, said “Business leaders will be relieved that the Chancellor’s Budget included no nasty surprises, having been conditioned in previous Budgets to expect the worst. We very much welcome the numerous measures intended to support British start-ups and scale-ups, such as the new Founders’ Relief, Young Entrepreneurs Allowance and EMI2 share incentives (as well as support for small brewers).

“What might at first blush be a case of small beer today could start adding up to something promising in the future. But there is still some way to go for the Government to win back the trust of British businesses, who will be looking for measures and assurances in the upcoming Ten Year Plan that restore long-term confidence in the UK economy enabling them to invest and grow.”

Charles Resnick, Chief Finance Officer, Afin Bank, said “The first Budget for Chancellor John Healey under the premiership of Andy Burnham was always going to be a tough balancing act, especially given that limited fiscal headroom would constrain additional spending and require careful prioritisation.

“For borrowers, the previously announced Your First Home scheme and the new First-Time Buyer ISA seek to boost the housing market by helping new buyers get on the property ladder. For savers, the reversal of the ISA cash allowance cut with the retention of the £20,000 tax-free allowance is good news, while plans for a starter ISA to incentivise first time investors is another attempt to encourage more people to invest rather than just save in cash.

“The extension of the scrapping of VAT on electricity bills until July next year, the removal of standing charges on gas bills and a £100 energy payment for an estimated 20 million households have all been designed to take some of the financial pressure off cash-strapped families.

“The 3% increase in the bank surcharge was lower than had been feared and banking shares rallied as a result, but how the markets respond to The Chancellor’s package of measures will be a real test for how it has landed. Ultimately, until the global picture improves, and especially the impact on energy prices of the war in Iran, the UK economic outlook remains tough for the public for the foreseeable future”

Owen Bassett, UK Risk Underwriting Manager at Atradius UK, said “After one of the most unpredictable run-ups to a Budget in years, businesses finally have greater clarity on the tax and cost environment they will be operating in. There are targeted measures here that should provide some welcome breathing room, from the relief threshold for retail, hospitality, and leisure being raised from £12,000 to £18,000, as well as lower electricity costs for manufacturers, to measures designed to encourage investment and entrepreneurship.

“The key question is how quickly that support translates into stronger cashflow. The 3.9% increase in the National Living Wage will add to employment costs for many businesses, while high borrowing costs and subdued demand continue to weigh on margins.

“A Budget can change a company’s cost base overnight, but businesses cannot always adjust at the same speed. Many are already facing significant cashflow pressures, with our latest data showing a 13% rise month-on-month in UK supplier claims for late or failed payments by their customers. We expect this cashflow pressure to be reflected in continuously high insolvencies throughout 2027 as post-pandemic debt, high borrowing costs and weak consumer demand continue to weigh on firms.

 “After any major change to the cost of doing business, firms should review their exposure to customers and watch closely for longer payment terms, repeated requests for extensions or invoices beginning to slip.”

Anna Leach, Chief Economist at the Institute of Directors, said “In the short-term, this Budget fulfils its brief of delivering some relief for households and a chosen few in the business community, particularly high street businesses and pubs. Ongoing efforts to improve the ecosystem for entrepreneurs alongside capital reforms are welcome and should help more businesses form and scale in the UK. The devolution agenda has considerable scope to improve the efficiency of the state, albeit the payoff is a fair way off and provided the risks are well managed. There’s tougher talk on tackling public spending, increasing the hope that fiscal risk will no longer fall so squarely on the shoulders of businesses and investors.

“But this Budget is also a missed opportunity. Business taxes go up again overall, as does borrowing. The £2.6 billion being spent on untargeted and small-scale reductions in household energy bills would have been better used to reduce the cost of employing young people or reducing business energy bills. The surcharge on banks may be smaller and shorter lived than feared, but it still represents yet another attack on successful large businesses in the UK which will do little for the UK’s global investor appeal. Spending restraint is tomorrow’s problem and the need for wholesale reform of the tax system remains.

“All in all, there’s no game changer for growth here. Living standards remain under pressure, housebuilding targets will not be met, distortionary taxes remain unreformed and the UK’s capacity to meet further shocks continues to be eroded. All eyes will be on next year’s Spending Review as the big test of the Government’s resolve in tackling some of the hard choices needed.”

Rob Keown-Boyd, CEO at Multifi, said “The Chancellor opened his Budget speech today with the promise of reducing the cost of business for firms large and small, but the measures announced simply don’t go far enough to help the SMEs that are facing a cashflow crisis. Whilst there are some positives, such as increasing the threshold for small business rate relief for retail hospitality and leisure businesses and bringing down energy costs for some businesses, the overall economic picture for businesses will remain incredibly challenging. The announcements today, whilst welcome, do not go far enough to address the rapidly increasing cost of business in the UK and do not offset the rises in Employers’ National Insurance Contributions and National Minimum Wage. What this means is that hiring will continue to stall and businesses will still not be able to invest in growth in the way that they want to.

“This all comes down to access to capital – demand for working capital has kept climbing through 2026; applications are running around a third higher than the same point last year. Businesses are crying out for the “breathing space” the Chancellor has promised but today’s Budget doesn’t go far enough in the current climate. When a business can better manage its cashflow, it can respond to today’s realities of running and growing a company. These are the people powering our economy and both the Chancellor and his Government must do more to recognise that. Action now also must go beyond politicians and it’s important that the lending sector provides transparent, fast, and simple working capital to support the businesses who play such a crucial role in the UK economy. With costs continuing to spiral rapidly there is certainly more work to be done.”

Alpesh Paleja, CBI Deputy Chief Economist, said “The easing pessimism about growth prospects chimes with a range of other data signalling a degree of resilience in the economy and will come as welcome news to the Chancellor ahead of the Budget. There are more examples of businesses reporting firmer order books, improving enquiries and new contract wins, particularly among those benefitting from specialist areas of demand.

“However, these signs of improvement remain uneven, and are often driven by firm-specific factors rather than a broad-based strengthening in demand. Businesses continue to report cautious consumers, delayed investment decisions, and persistent cost pressures squeezing margins and operations.

“Fears about the Budget have compounded these pressures, presenting a new headwind to growth over recent months. If the government is serious about matching its economic ambitions with action, the Chancellor must now take the bold decisions needed to give business the breathing space to invest, hire and grow. That means cutting the costs holding firms back, simplifying the tax system and accelerating decisions that unlock growth. Get those conditions right and firms across the UK will respond with more jobs, increased investment and stronger growth.”

Alan Vallance, ICAEW Chief Executive, said “The message was that this would be a steady Budget. With little damaging speculation in the run up, relatively minor commitments and few gimmicks, today’s was largely a “steady as she goes” budget which will give the Chancellor the breathing space he needs for big decisions in the 10-year plan and Spending Review.

“Amid the geopolitical uncertainty hitting the economy, today’s measures will help households and businesses navigate their finances. In particular, the Budget gives welcome room for entrepreneurs to start and scale businesses, and to give those with side hustles extra space to keep what they’ve earned. Before the Budget we called for no additional taxes on taking on staff and some relief on business rates, so companies will be pleased on that front.

“While the measures announced today did not add too much complexity into the tax system, ICAEW Chartered Accountants tell us that businesses find continual yo-yoing on capital allowances and other reliefs unhelpful and prize stability over changes. As he looks beyond his first 100 days, the Chancellor should continue to support business to deliver growth and unlock investment.”

“The OBR’s latest forecasts offer markedly more storm clouds than sunshine, with this year’s marginal growth upgrade lost in a fog of painfully weaker growth in later years amid rising inflation, higher interest rates and squeezed fiscal headroom.

“The minimum wage increase is a double-edged sword. Though it could help ease cost-of-living pressures for some workers, it may dampen hiring by raising employment costs, particularly as businesses continue to shift towards greater automation.

“While the Budget contained several short-term fixes, the lack of significant measures to tackle the structural barriers holding back economic growth leave the UK vulnerable to external shocks at a time when fiscal headroom remains under pressure.

“This relatively low-key Budget likely contains enough fiscal discipline to keep the UK off global bond markets’ radar for now, clearing the way for rate-setters to begin gradually raising interest rates, almost certainly starting next week.”