What does the 2026 Budget mean for Business, Innovation, Science & Trade? Ben Pegrum, Political Consultant for Science, Innovation and Technology at Dods, examines the key announcements, outstanding policy questions and what the Budget signals for the future of the sector.
What are the key takeaways for your sector?
Ben Pegrum: This Budget was framed as giving businesses breathing space, with the Government emphasising its decision to avoid broad-based tax increases. In this sense, its message to business was defined as much by what it did not do as by what it did do. Following previous Budgets that were criticised for increasing business costs, the Chancellor sought to offer reassurance and stability.
In reality, however, the Budget provided a more nuanced set of measures. While headline Capital Gains Tax rates remained unchanged, the Business Asset Disposal Relief lifetime limit will halve to £500,000 from April 2027. Alongside this, qualifying founders will receive a 10 percent rate on up to £10m of lifetime gains through Founders’ Relief. This suggests a more selective approach, favouring innovative, high-growth companies.
For smaller high street businesses, support was more immediate in its purpose. The full business rates relief threshold will rise to a rateable value of £18,000 for qualifying retail, hospitality and leisure properties in England from April 2027, taking around 70,000 additional businesses out of paying rates. The wider regulatory and tariff package is expected to save businesses almost £800m annually, although the benefit will vary between firms.
Support for innovation also extended beyond tax reliefs. The £5bn increase in the British Business Bank’s financial capacity seeks to help firms access funding to expand, while the AI package of over £600m combines investment in British companies with support for security. Its £80m procurement allocation also provides opportunities for firms to develop technologies for public-sector customers. The Burnham Government has therefore sought to reassure businesses by avoiding broad-based tax increases, while directing targeted support towards innovation and domestic capability.
What has the Government not sufficiently addressed in the Budget for your sector?
Ben Pegrum: While the Budget avoided broad-based tax increases and offered targeted relief, there are fundamental issues left unresolved.
Energy support was prominent within the Budget; the Iran war provides inescapable headwinds. The Budget confirmed a 20–25 percent electricity discount for around 10,000 energy-intensive manufacturing businesses from April 2027, including a back payment for 2026–27. However, techUK highlighted the absence of immediate electricity-cost relief for data centres and mobile network operators. For these businesses, administrative savings will offer limited compensation for high operating costs.
The Government’s support for research and technological development has been accompanied by a more explicit emphasis on commercial outcomes and its contribution to wider industrial priorities. However, the British Academy criticised the failure to address universities’ financial difficulties, while research organisations warned that departmental capital savings could put R&D under further pressure. Support for commercialisation will be harder to sustain if the institutions supplying research, skills and new ideas remain financially vulnerable. The Budget therefore offers some relief without resolving the underlying pressures on these sectors. Operating costs and financial fragility continue to constrain businesses and research institutions. Therefore, the landscape in which business operate may not see a stark different following the budget.
Have the Government’s priorities changed in your sector? Why?
Ben Pegrum: The clearest change is in the Government’s positioning towards business. Following the reception of previous tax-raising Budgets, this Budget sought to reassure firms that ministers recognised the cumulative pressures they faced. techUK’s assessment that the Chancellor had met its request to “do no harm” illustrates the significance of that restraint. The perceived change in direction rests partly on what the Government chose not to do.
Alongside that shift in tone, the Budget points towards more targeted support for innovation. UKRI will concentrate £1bn on priority innovation clusters, while Sovereign AI’s investment remit includes physical and industrial AI. These measures suggest closer alignment between technological development, regional growth and domestic productive capacity.
The Government remains focused on growth but, particularly when seeking growth from technological development, is increasingly concerned with ensuring that it serves the wider government agenda.
Any additional reflections?
Ben Pegrum: The additional £80m for Sovereign AI’s R&D Procurement Scheme is particularly relevant to companies seeking public-sector customers. Its scope includes health and care, AI security and assurance, and defence applications.
This addresses an important stage in commercialisation, but delivery will depend on how contracts are designed and what follows a successful pilot. techUK has highlighted procurement design as a persistent barrier for scale-ups selling to government.
An initial research contract can establish a technology’s value. However, companies will still need procurement requirements that accommodate newer suppliers and a credible route to subsequent contracts.