UK Autumn Budget brings new pressures for retail

Rachel Reeves delivered her first Autumn Budget under intense scrutiny on Wednesday, after the Office for Budget Responsibility (OBR) accidentally published key details hours before the Chancellor addressed Parliament. The package outlines 26bn pounds in new tax rises, building on last year’s 40bn pounds increase, and places UK retail and fashion businesses at the centre of a shifting economic strategy.

Slower growth, higher taxes, nervous markets

Much of the government’s new revenue comes from freezing income tax thresholds, tightening salary-sacrifice rules and a series of smaller fiscal measures. The OBR now expects the UK tax burden to reach a record 38.3 percentage of GDP by 2029–30.

The growth outlook was also sharply revised. UK GDP is forecast to expand 1.5 percentage this year, slightly stronger than expected, but 2026 growth has been downgraded to 1.4 percentage, falling behind the eurozone’s expected average of around 1.8 percentage, according to recent European Commission projections. The downgrade weighed on markets: the FTSE 250 slipped 0.3 percentage and the FTSE 100 eased 0.1 percentage as Reeves spoke.

Despite the headwinds, the Chancellor highlighted 22bn pounds of fiscal headroom, almost double what was expected in March. Sterling strengthened as investors concluded the Budget avoided any major shocks.

Business rates remain a major burden for retail

For fashion and retail businesses, the Budget underscores the continued reliance on business rates. Despite Labour’s manifesto pledge to reform the system, the OBR shows that the Treasury is set to collect 34bn pounds in 2025–26, up 4.9 percentage from the previous year. By 2030, this figure is projected to rise to 42bn pounds, driven largely by the expiry of transitional relief, which has previously softened steep hikes in rateable values for retailers and other companies.

Much of the increase comes from a new higher rate band for properties valued above 500,000 pounds, alongside another sharp rise in the rates multiplier, which sets how much companies pay based on their rateable value. The multiplier will rise by 10.2 percentage next year, potentially adding significant operating costs for large-format retail spaces and distribution centres. The combination of higher rates and other rising costs is likely to put considerable pressure on both physical and online retail businesses.

Industry reaction: mixed impacts for retail

Matt Dalton, Consumer Sector Leader at Forvis Mazars, described the Budget as a mixed outcome for the retail sector. He welcomed the government’s move to ease business rates for small shops and leisure properties, but warned that the reversal of protections for large supermarkets is a significant setback. Many of these bigger sites anchor high streets and town centres, and any retreat in investment could ripple through supply chains, jobs, and local communities.

Dalton added that retailers now need clarity on how reforms will be rolled out, cautioning against cliff-edge scenarios for businesses that are expanding or restructuring. Freezes to employer National Insurance contributions and planned changes to import exemptions will ease some pressure, although the delay of new import rules until 2029 leaves certain businesses at a disadvantage.

Entrepreneurship and small business support

The government also signalled a push to make the UK more attractive to founders, launching a consultation on how to make tax support more founder-friendly. Scale-ups and investors are being invited to contribute.

Small businesses are set to gain from the British Business Bank’s new five-year strategy. With 25.6 billion pounds in permanent financial capacity, the bank plans to invest at least 5 billion pounds into growth-stage funds and scale-ups, significantly expanding access to capital for early-stage firms, including fashion and consumer brands.

Business rates relief for small shops and hospitality

More than 750,000 retail, hospitality and leisure properties will benefit from permanently lower business rates from 2026–27. The government says small and standard RHL properties will face their lowest tax rates in decades, while higher rates on large properties will fund the relief.

To soften the impact for businesses seeing an increase, the government is introducing a 3.2 billion pounds Transitional Relief scheme and expanding the Supporting Small Business measures, offering help to independent pubs, shops, and those transitioning toward the new rate structures.

Further reform is planned: businesses expanding into a second property will get two extra years of Small Business Rates Relief, and a new call for evidence will explore how to remove barriers to investment and address concerns over current valuation methods.

Customs and import changes

The longstanding 135 pounds customs duty exemption on low-value imports will end by March 2029 at the latest. A consultation has been launched ahead of the change. For fashion and e-commerce retailers that rely on low-cost cross-border fulfilment, this is expected to increase costs and administrative complexity.

Implications for fashion and retail

Overall, the Autumn Budget presents a mixed landscape for the retail and fashion industry. Downside pressures include rising tax burdens, higher business rates for large stores, and the end of low-value import exemptions, set against a backdrop of slower medium-term growth than many European counterparts.

Supportive measures include permanent rate relief for small shops, expanded funding for scale-ups, freezes to employer National Insurance, and a more moderate market reaction than many feared.

For retailers, the key challenge will be managing rising operational costs while preparing for a phased series of regulatory and fiscal changes stretching into the next decade. Clear timelines, manageable transitions, and minimal administrative burdens will determine how the sector absorbs the impact of Reeves’s first Autumn Budget.