Budget 2026 reaction: The Budget does not meet scale of UK government’s ambitions

Our test for this Budget was simple: would each decision make that easier? Measured against the scale of the Government’s own ambitions, it does not meet them.

There is much to respect in the Chancellor’s approach especially during global upheaval, with conflict in the Middle East pushing up borrowing costs across the G7. Fiscal discipline matters, and using some headroom to absorb a genuine short-term shock is far better than loading permanent costs onto business. Sticking to the Corporate Tax Roadmap was the right call. So were the new support for founders and an extra £5 billion of capacity for the British Business Bank, which will help growing firms secure the backing to invest and scale.

John Healey's first Budget does not meet the scale of that ambition on the cost of doing business, which firms experience not as separate bills but as one squeeze on the same balance sheet. Next April, the National Living Wage rises by 3.9 per cent to £13.21 an hour, landing on employers still absorbing last year’s 28 per cent jump in employer National Insurance. With around a million young people across the UK not in education, employment or training, slowing the convergence of youth rates with the National Living Wage is sensible. But raising the employer NICs threshold would have done far more to help firms create the entry-level jobs those young people need.

Energy tells the same story, as households will welcome help with their bills, and around 10,000 energy-intensive manufacturers will see electricity costs cut by up to a one-quarter from next April. But for most businesses, from a distillery to a city-centre hotel, which are facing energy bills a third higher than their European counterparts, there is nothing concrete. Distilling is energy-hungry work, and every pound spent on power is a pound not invested in production or jobs in one of Scotland’s biggest export industries. Scottish firms will want to see the detail of the government’s pledges on business energy costs in its upcoming Ten Year Plan.

The temporary doubling of the bank surcharge to 6 per cent will be felt keenly in Scotland, where financial services is one of our biggest economic strengths. UK banks already carry a heavier tax burden than their overseas competitors, and the cost will ultimately fall on customers through higher borrowing costs. The Chancellor must hold firm to his commitment that it ends in March 2028.

For Scotland specifically, there is welcome progress: an extra £600 million for the Scottish government, faster designation of the Scottish National Investment Bank as a public financial institution, jointly funded defence colleges and a new chip design academy in Edinburgh. But the Acorn Carbon Capture Storage (CCS) project in the North-east, which is central to decarbonising Scottish industry, is offered only the prospect of loan or equity support. The Energy Profits Levy also remains until 2030, more than three years later than we called for which will add uncertainty

Relief for retail, hospitality and leisure firms in England misses the chance for wholesale reform of business rates. In Scotland, rates are for the Scottish government to fix and we have called for a full system wide review that avoids a complex patchwork of reliefs, which is why December's Scottish Budget matters so much. With fresh funding, the Scottish government must use the levers it holds: a planning system that moves at the speed of investment, skills programmes that close persistent gaps, and non-domestic rates reform that rewards growth rather than penalising it.

After a UK Budget that did not live up to the government’s own ambitions, firms will be looking for a bolder offer in the Scottish Budget on 3 December.

Neither government can grow Scotland’s economy alone, but when both pull in the same direction, as they have on defence skills, businesses respond with investment and jobs. That is the partnership Scotland needs now.

Michelle Ferguson OBE, director, CBI Scotland