UK Autumn Budget Highlights 2026: What businesses need to know about growth, inflation and insolvency risk

The Chancellor presented a budget that aimed to provide much needed “breathing space” and “hope” for businesses and households struggling with rising costs and squeezed incomes. Delivering his inaugural budget - and the first under new Prime Minister Andy Burnham – Chancellor of the Exchequer John Healey demonstrated fiscal discipline, announcing targeted support alongside a sobering economic forecast.

Citing the effects of higher energy costs and interest rates, the Office for Budget Responsibility (OBR) cut its 2027 growth forecast from +1.5% to +1%. It also expects inflation to peak at +3.75% early next year, although the Bank of England says inflation could rise even further to +5% in mid-2027. While slightly less pessimistic, we also expect growth to slow to around +1.2% in 2027 and 2028 as higher interest rates soften investment growth and keep residential investment weak.

Despite the OBR’s forecast for weaker growth, the budget does offer glimmers of hope for businesses. The Chancellor announced an increase in business rate relief for small firms in retail, hospitality and leisure, which could see 70,000 firms taken out of paying rates altogether. There is also a commitment to bring down energy costs: UK industrial electricity prices are 63% above the international median, the highest in the developed world, according to the IEA.

Tax relief

In a bid to support innovation, the Chancellor announced tax relief for company founders alongside measures to accelerate domestic data centre capacity and support for AI adoption. Proposed fiscal devolution, alongside a £20 billion funding boost for public financing institutions like the National Wealth Fund, are aimed at unlocking and strengthening investment in infrastructure, business and regeneration.

Tax and regulatory simplification

The budget also signalled the Labour government’s willingness to pursue much needed reform: there are plans to simplify corporation tax simplification and resurrect the Better Regulation Executive to guide regulatory reform and help cut red tape for businesses. Less than a week after the budget, the UK and EU agreed a draft deal to remove post-Brexit border checks from food and agriculture exports under the government’s so-called Brexit reset initiative and ahead of a UK-EU summit later this month.

The UK economy has shown a surprising degree of resilience to external headwinds: the economy expanded by 0.1% in August despite expectations of a potential contraction, according to the Office for National Statistics. We recently revised up our growth forecast for this year to +1.3% (+0.3pp) while the International Monetary Fund (IMF) raised its forecast to +1.3% (+1%): if born out, the UK would have the second-fastest growing economy in the G7 this year.

However, the outlook is uncertain, with as much chance of a surprise upside as downside. According to the OBR, higher-for-longer energy prices could raise government borrowing £17 billion above the central forecast in 2027-28, yet a fall in energy prices could reduce borrowing by £12 billion. Our baseline global growth forecast assumes that three key risks - a fresh energy shock, a global bond sell-off and renewed doubts about the AI boom – unwind, rather than escalate.

Weak growth and higher-for-longer interest rates and energy costs are choking vulnerable companies and extending the current expected peak for global insolvencies. We expect global insolvencies to rise +5% in 2026 and a further +1% in 2027, marking five consecutive years of increases. Large companies in particular are failing at a record rate, underscoring the risk of a domino effect on suppliers and subcontractors, potentially boosting insolvencies among smaller firms.

In the UK, we expect business insolvencies to stabilise, albeit remain elevated. Insolvencies should reverse their five-year upward trend in 2026 with a -4% decline, followed by a further -3% in 2027. However, business insolvencies would remain 21% above pre-pandemic averages in 2027 while many UK businesses continue to face weak demand and rising costs – in November, the Bank of England raised the Bank Rate by +0.25% to 4% and warned further increases could not be ruled out. Read our UK insolvency outlook to learn more.

The autumn budget strikes a pragmatic balance between fiscal discipline and business support, but it is unlikely to remove the headwinds facing UK companies. With growth expected to slow in 2027, inflation forecast to remain above target, interest rates elevated and insolvencies still above historical norms, businesses should prepare for a period of moderate growth rather than a rapid economic rebound.

Global volatility and macroeconomic uncertainty make it challenging for businesses to navigate risk. At Allianz Trade, we combine trade credit insurance, business intelligence and debt collection expertise to help you assess customers, protect cash flow and trade with confidence.