Budget 2026 series

Budget 2026 29 October 2026

Markets · Winners and losers

UK Budget 2026: Winners, Losers and the Changes That Really Matter to Investors

The Chancellor has offered selective relief to households and businesses while asking banks and gambling operators to contribute more. For UK equity investors, the most significant developments may be the ones that alter company earnings rather than those attracting the largest headlines.

Mickey Perry29 October 2026Equity & Markets Insight

What has been announced?

John Healey’s first Budget as Chancellor was delivered yesterday against what is a relatively difficult economic backdrop. Although the economy has shown some resilience during 2026, we are in the midst of concerns about rising energy prices, rises in borrowing costs and weak consumer spending, and all three threaten to undermine that progress next year.

I felt that while there were quite a lot of announcements made today, they were generally not that dramatic.

For investors, the Budget raises an important question. Which measures will change the profitability of British companies, and which will make little difference once their effects are spread across a business?

It is tempting to treat a tax reduction, an increase in government investment or additional support for households as an automatic positive for the stock market. In practice, the connection is rarely that straightforward. Lower costs can improve corporate margins, but higher wages can absorb those savings. Additional housing demand can benefit housebuilders, but higher mortgage rates can undermine buyers’ affordability. And a tax increase can be greeted positively by the market if investors were expecting something worse.

This Budget contains examples of all three.

The economic backdrop

The Office for Budget Responsibility has increased its UK growth forecast for 2026 to 1.2%, but expects growth to slow to just 1.0% in 2027. These are relatively low numbers. They are not that surprising, I wouldn’t say, but they are low.

UK GDP growth

Monthly GDP, % change on previous month, October 2023 to August 2026, with the OBR’s new annual forecasts

Monthly growth (ONS)OBR forecast, annual growth

Household consumption growth is projected to grow only 0.6% next year, while inflation is expected to hit an average of 3.4% and unemployment is forecast at 5.1%.

Household consumption growth

Real household spending, % change on previous quarter, Q4 2023 to Q2 2026, with the OBR’s new annual forecasts

Quarterly growth (ONS)OBR forecast, annual growth

CPI inflation

12-month rate, %, October 2023 to September 2026, with the OBR’s annual-average forecasts for 2026 and 2027

CPI 12-month rate (ONS)OBR forecast, annual average

Unemployment rate

LFS unemployment, aged 16 and over, rolling three-month rate, %, with the OBR’s annual-average forecasts for 2026 and 2027

Unemployment rate (ONS)OBR forecast, annual average

These are hardly conditions in which businesses can assume that sales volumes will rise strongly or that customers will willingly accept further price increases.

Furthermore, the government’s fiscal headroom has fallen to only £15 billion projected for 2029–30, and additional debt interest costs are forecast to average £14 billion a year compared with the spring forecast. The public finances offer relatively little protection against another economic shock.

Government debt interest

Central government debt interest, net of the Asset Purchase Facility, £ billion by fiscal year — outturns and the October 2026 OBR forecast

OutturnOBR October 2026 forecast

Fiscal headroom at each fiscal event

Margin against the Chancellor’s main fiscal rule in the target year, £ billion, Autumn Statement 2023 to Budget 2026

Borrowing is projected to decline from 4.2% of GDP in 2026–27 to 3.4% in 2027–28, but the pressure from government debt servicing remains substantial.

UK government borrowing

Public sector net borrowing, % of GDP, 2021–22 to 2025–26 outturns and the OBR’s forecasts for the next two years

OutturnOBR October 2026 forecast

This matters to equity valuations because gilt yields influence the wider cost of capital. Higher borrowing costs affect mortgage rates, corporate financing expenses and the returns investors require from shares.

For companies such as Persimmon, Taylor Wimpey and Bellway, wider mortgage affordability may therefore matter as much as the government’s new housing initiative. For businesses carrying substantial debt, the financing environment could outweigh relatively modest tax or regulatory savings.

The Budget’s smaller impacts

There was a raft of relatively small-impact items that gained attention in the Budget, but I don’t really see them having a major impact upon the markets or upon our investment rationale.

For instance, the government announced a £100 Household Energy Payment, electricity VAT relief and a fuel-duty freeze to help support consumers. These are unlikely to have any real big impact upon companies. A measure can be meaningful to an individual household without materially changing the financial performance of Tesco, Next or Marks & Spencer.

My personal opinion is that an additional £100 of household support doesn’t touch the sides of truly helping consumer spending or consumer confidence, it is just a gimmick!

They’re just good sound bites.

Further, Britain’s large international companies, including AstraZeneca, RELX and many global commodity producers, derive substantial portions of their earnings overseas. Their valuations depend far more on international operations, demand and currency movements than on most domestic Budget measures.

Where the Budget made a bigger impact

Where the Budget did make a bigger impact on potential valuations is the temporary increase in the Bank Corporation Tax Surcharge, which goes from 3% to 6%, runs for 15 months from January 2027 and is expected to raise approximately £1.5 billion. This will have a direct impact upon UK-focused banks, Lloyds and NatWest in particular, as a direct increase in tax on qualifying profits.

On paper, the fact that the increase is temporary reduces its longer-term impact on valuations compared with a permanent change. I personally still have some slight concern there. Yes, the government has said that from January it will increase the surcharge, and that it will only increase temporarily for 15 months. But in fifteen months’ time, I don’t see any reason why they cannot continue keeping it at a higher rate if they feel like it. So while it has been called a temporary measure, I’m not so sure that it is as temporary as has been presented.

That seems to me a bit of a case of a government wanting both sides of the story. They want to tax the banks, but they also want to be seen to be pro-banks.

Housebuilders, as previously announced, did receive a more favourable development with the £4.7 bn “Your First Home scheme”, which aims to support approximately 70,000 first-time buyers. The government is estimating that this will help deliver around 20,000 additional homes.

But in truth, that is not that many homes. So it is positive for housebuilders, but maybe it is not that positive. It is definitely not as positive as lower interest rates or greater affordability on a wider scale for the entire housing market would be, and it does not eliminate the challenge presented by high mortgage rates.

Elsewhere, hospitality operators face a mix. They are getting some relief, such as business rates relief for qualifying pubs, social clubs and live music venues, which will increase from 15% to 35%. But with the National Living Wage rising by 3.9% to £13.21 an hour from April 2027, this may have a significant impact on some operators and increase their labour costs. JD Wetherspoon and Mitchells & Butlers could benefit from the rates decision, but the net improvement will depend upon how much of the saving is absorbed by higher wages and other operating costs.

Industrial businesses may also emerge as more important beneficiaries than initially appreciated. Electricity discounts of up to 25% for eligible energy-intensive manufacturers could materially improve their cost competitiveness, particularly where power represents a substantial proportion of production expenses.

What does this mean for the FTSE 350?

I think this Budget will have a bit of a mixed movement, and we have already seen some interesting movements so far in the markets.

It was quite interesting to see housebuilders initially do okay on the market, rising while the Chancellor was at the despatch box and the Your First Home scheme was confirmed, but latterly in the day, as the Budget was digested, they shifted significantly downwards. Taylor Wimpey closed down -7.3%, Persimmon -6.9%, Barratt Redrow -6.6%, Vistry -5.9%, Bellway -5.7% and Berkeley -3.3%. As a group the housebuilders fell around -6%, their biggest one-day drop since January 2025, which rather confirms my view that 20,000 homes does not move the dial.

On transport, shares were generally down, but just marginally. The airlines were nearly flat on the day really, but with a slight downward drift. IAG closed down -1.4%, Jet2 down -1.6% and Wizz Air flat.

Retail shares generally saw a bit of a negative day. DFS Furniture was down -2.7%, Burberry Group down -1.7%, Topps Tiles down -2.6%, Kingfisher down -2.7%, Sainsbury’s down -2.5% and Marks & Spencer down -1.7%.

Construction was a bit more flattish, although Ibstock, the brick maker, was down -4.6% and Marshalls down -3.1%.

On the hotels front, while PPHE Hotel Group was flat on the day, Whitbread actually saw a rise of 5.6%, which is quite surprising. Maybe there were some expectations of worse news. JD Wetherspoon and Mitchells & Butlers were both flat on the day, and I don’t think the market has really decided yet on the pubs. In both cases there does seem to be some slight uncertainty.

The gambling operators, who are being asked to contribute more, rallied regardless. Rank Group rose 11.7%, Evoke 3.7% and Entain 3.6%, which again looks like a sector that had been priced for something worse than it got.

The banks were up on the day. NatWest closed up 2.0%, Lloyds Banking Group up 1.7% and Barclays up 1.6%, with Standard Chartered up 2.4%. HSBC was flat and probably largely unaffected because of its international basis. Lloyds and NatWest had risen by as much as 3% to 4% as the surcharge news broke, since a doubling to 6% was less than some had feared, before the gains moderated into the close.

How the FTSE 350 sectors moved on Budget day

Average sector movement, 28 October 2026, % change on the day

Up on the dayDown on the day

What we can see here is a muted response to the Budget thus far, the housebuilders aside. It might still be slightly early in the process, but investors as a whole looked at the Budget and saw nothing particularly exciting to shout about, and nothing too much to get concerned about. The FTSE 100 closed up just 0.1% and the FTSE 350 was essentially unchanged.

Of particular note, investors in the banks may have been concerned about longer-term increases to the surcharge, for the reasons I set out above, which would explain why the early gains faded through the afternoon.

I would expect the effects to be considerably more uneven across individual stocks than across the broader market. Banks face a direct, and possibly not so temporary, earnings headwind. Housebuilders gained a modest sales-volume catalyst that the market has already decided is not enough. Pubs receive relief that could protect margins, while energy-intensive manufacturers gain an opportunity to reduce operating costs. The FTSE 250, with its greater exposure to domestic British economic activity, may be more sensitive to these measures than the internationally diversified FTSE 100, and today it was the weaker index.

The immediate reaction to the Budget also needs to be separated from its longer-term consequences. Share prices respond to the difference between what was announced and what investors expected. Earnings respond to what actually happens to revenues, costs and taxation.

My conclusion is that this is not a Budget that dramatically transforms the investment outlook for many companies. It is a collection of targeted interventions, some of which could be highly significant to particular businesses, while others are unlikely to change projected earnings per share by a meaningful amount.