Burnham’s first Budget: Supporting the green economy
<p>Chancellor John Healey delivers his first Budget on Wednesday 28 October 2026. The statement arrives at a testing moment for UK businesses. Inflation remains stubbornly high, energy markets continue to swing unpredictably, and public spending pressures are mounting. For companies navigating net zero commitments, the Budget will reveal whether the Burnham government can reconcile fiscal discipline with the investment needed to support a credible green economy.</p><p>Success in this Budget will not come from a handful of environmental announcements. It will require a coherent framework that gives businesses the confidence to commit capital, the policy stability to plan multi-year investments, and the practical support to reduce energy costs while decarbonising operations. Without these elements, the government's green-growth ambitions risk remaining aspiration rather than actionable strategy.</p><h2>Burnham and Healey inherit a difficult landscape</h2><p>Andy Burnham took office as Prime Minister on 20 July 2026, four days after winning the Labour leadership. He appointed John Healey as Chancellor the same day, replacing Rachel Reeves. This Budget therefore sets the tone for the new administration's economic direction and explains how it intends to fund its commitments.</p><p>Healey confirmed the Budget date on 31 July. He promised a statement "built on fiscal discipline" that would comply with the government's fiscal rules. He also signalled a clear intent to shift "money and power out of Westminster, and into every postcode around Britain".</p><p>That decentralisation agenda has direct consequences for the green economy. Combined authorities may gain greater control over business-rate revenues and economic development budgets. A future roadmap is expected to address wider fiscal powers for mayors. In practice, this could allow local leaders to support clean-energy projects, retrofit programmes, public-transport improvements and green-industrial clusters more directly than central government has managed.</p><p>Meanwhile, the economic backdrop is challenging. The UK economy reportedly achieved joint-fastest G7 growth in the first half of 2026 alongside the United States. However, consumer inflation remains elevated and is expected to exceed 4% early next year. The continuing conflict in the Middle East has disrupted global supply chains and energy markets, increasing pressure on household bills and business operating costs.</p><p>The Bank of England is expected to consider raising interest rates to bring inflation back towards its 2% target. Higher borrowing costs would make it more expensive for companies to finance renewable-energy infrastructure, building upgrades, electric-vehicle fleets and other capital-intensive projects that form the backbone of decarbonisation.</p><h2>Businesses need multi-year certainty, not stop-start support</h2><p>Clean-energy and low-carbon investments typically require substantial upfront capital and produce returns over many years. Consequently, businesses need confidence that support mechanisms, planning rules, taxation and regulatory requirements will not change abruptly. Short-term grants and temporary relief have their place, but they cannot substitute for a credible multi-year framework.</p><p>A useful Budget would set out clear funding trajectories for energy efficiency, renewable generation, grid infrastructure, clean heat, industrial decarbonisation and low-carbon transport. These trajectories should extend beyond a single spending round. They should provide enough visibility for businesses to make investment decisions, secure finance, and plan supply chains.</p><p>For example, a company considering a heat-pump installation or a warehouse solar-and-battery project needs to know what capital allowances, grants or contracts will be available in two or three years' time. Similarly, a manufacturer evaluating electrification of its processes needs to understand how grid connection timescales, network charges and energy-efficiency support will evolve.</p><p>Without this certainty, businesses delay decisions, investors price in higher risk, and the transition slows. Therefore, the Budget's most valuable contribution may not be the size of individual spending lines but the clarity of the forward framework.</p><h2>Energy affordability remains a business and social priority</h2><p>Energy costs matter to businesses and households alike. Burnham has already removed VAT from domestic electricity bills. The government is examining additional measures to reduce household energy costs, with reports suggesting ministers are considering more than £1bn in targeted support for households struggling with higher bills. Changes to standing charges and the Warm Home Discount are also under discussion.</p><p>For businesses, however, the central question is whether the Budget will address the structural causes of high energy costs. Temporary bill support can provide relief, but it does not substitute for investment in generation, networks, storage, efficiency and flexibility. A stronger green-economy package would link affordability with decarbonisation by accelerating home insulation, heat-pump deployment and energy-management systems.</p><p>Reducing demand lowers bills while easing pressure on the electricity system. It also reduces exposure to imported energy-price shocks. Energy-intensive manufacturers, food processors, logistics companies and commercial property operators all stand to benefit from a strategy that permanently reduces consumption rather than temporarily subsidising it.</p><p>Furthermore, demand reduction can offer fiscal benefits over time. Lower energy consumption reduces the scale of future household support requirements and limits the government's exposure to volatile wholesale markets. This makes energy efficiency one of the few areas where climate investment and fiscal prudence can reinforce each other.</p><h2>Industrial decarbonisation offers regional and economic returns</h2><p>Burnham has identified reindustrialisation as an early priority. This creates an opportunity to connect industrial policy with the net zero transition in a way that delivers economic and environmental benefits simultaneously. A credible programme could focus on sectors such as steel, chemicals, cement, glass, ceramics, food processing and heavy transport.</p><p>These industries face high energy costs and international competition. However, they also offer opportunities for clean-technology deployment, skilled employment and regional regeneration. Potential measures might include expanded support for industrial energy efficiency, investment in carbon capture and storage where technically appropriate, and assistance for electrification and low-carbon heat.</p><p>Public procurement could create demand for lower-carbon materials, giving British manufacturers an advantage. Skills funding linked to clean manufacturing and construction would support the workforce transition. Better coordination between industrial clusters, ports, grid operators and local authorities could align infrastructure investment with regional capabilities.</p><p>The significance of this agenda is regional as well as environmental. Giving local leaders greater control over economic development could help align clean-industry investment with existing manufacturing capabilities and workforce needs. Our <a href="https://sbs.eco/net-zero-hub/">net zero hub</a> provides resources for businesses navigating this transition.</p><h2>Tax and regulatory reform must support smaller green businesses</h2><p>The Chancellor is expected to focus on reducing administrative burdens. Reports indicate that businesses could receive about £800m in savings from paperwork reductions. Proposals have also been discussed to raise the threshold at which small companies begin paying business rates from £12,000 to £18,000.</p><p>Such measures could benefit smaller firms, including installers, retrofit contractors, energy-service companies and clean-technology suppliers. However, deregulation would need to be carefully designed. Removing unnecessary bureaucracy can support investment, but weakening environmental reporting or standards could undermine market confidence and make it harder to measure progress.</p><p>For the green economy, the most useful approach would be to simplify compliance while preserving clear requirements on emissions, energy performance and climate-related disclosure. This balance is particularly important for SMEs bidding for public-sector contracts, where PPN 06/21 carbon-reduction requirements remain in force. Businesses can access support for <a href="https://sbs.eco/net-zero-program/">carbon reporting compliance</a> to meet these obligations.</p><p>Simplification should focus on reducing duplication, improving digital reporting systems, and aligning environmental requirements across different regulatory regimes. It should not create loopholes that allow companies to avoid meaningful disclosure or undermine the integrity of carbon reporting.</p><h2>Fiscal constraints will shape the scale of green investment</h2><p>Healey and Burnham have committed to fiscal discipline and have told ministers to work within existing spending limits while funding new priorities. The government is also under pressure to finance an additional £5bn in defence spending announced in the Defence Investment Plan.</p><p>The Resolution Foundation has argued that the Chancellor should raise around £8bn in additional tax revenue and rebuild fiscal headroom to at least £20bn. The think tank estimated that headroom had fallen from £24bn to £12bn, partly because of the economic consequences of the Middle East conflict.</p><p>These constraints may limit the scale of new green spending. They also increase the importance of measures that mobilise private capital, improve productivity or reduce public expenditure over time. For example, public funding could be used to de-risk projects, provide guarantees, anchor demand or support early-stage deployment rather than covering the full cost of infrastructure.</p><p>This approach requires careful design. Guarantees and risk-sharing mechanisms can attract private finance, but they must be structured to avoid excessive public liability. Similarly, tax incentives can encourage investment, but they reduce revenue in the short term and must be justified by clear long-term benefits.</p><h2>Six tests for a credible green-economy Budget</h2><p>A Budget that genuinely supports the green economy would demonstrate six characteristics. First, it would provide stable investment signals through multi-year commitments for clean power, grids, retrofit, low-carbon transport and industrial decarbonisation. Second, it would link affordable energy with permanent demand reduction through insulation, heat pumps and energy management.</p><p>Third, it would give mayors and local authorities greater powers and resources to develop green industries and infrastructure in their regions. Fourth, it would connect industrial strategy with competitiveness, skills and emissions reduction. Fifth, it would make clean investment more accessible through guarantees, tax incentives or public-private mechanisms.</p><p>Sixth, it would demonstrate credible implementation through clear timetables, measurable outcomes and transparent reporting against climate and economic objectives. A Budget that announces ambitious targets without funding, planning reform or delivery capacity would be less convincing. Equally, a package focused only on short-term tax relief could fail to address the structural problems facing the energy system and energy-intensive businesses.</p><h2>Essential figures and dates for UK businesses</h2><ul><li>The Budget takes place on Wednesday 28 October 2026, delivered by Chancellor John Healey.</li><li>Andy Burnham became Prime Minister on 20 July 2026, four days after being elected Labour leader.</li><li>The government has committed to fiscal discipline and compliance with its fiscal rules.</li><li>Defence spending requirements are expected to add £5bn to public expenditure pressures.</li><li>Business paperwork reductions could save companies around £800m annually.</li><li>The small-business business-rate threshold may rise from £12,000 to £18,000.</li><li>The Resolution Foundation recommends raising about £8bn in additional tax revenue.</li><li>Fiscal headroom has fallen from £24bn to £12bn according to the Resolution Foundation.</li></ul><h2>Climate investment is economic resilience, not discretionary spending</h2><p>The Budget will test whether Burnham's government can reconcile three competing demands. It must protect households from high living costs, maintain confidence in the public finances, and accelerate the transition to a low-carbon economy. These goals are not necessarily in conflict, but they require careful sequencing and design.</p><p>The green economy should not be treated solely as a cost centre. Properly designed, investment in clean power, efficient buildings and low-carbon industry can improve energy security, create skilled employment and reduce exposure to volatile fossil-fuel prices. However, those benefits depend on sustained policy support and effective delivery.</p><p>Healey's most consequential decision may therefore be whether to frame climate investment as discretionary spending or as part of the country's economic resilience strategy. A Budget that connects decarbonisation with regional growth, industrial renewal and lower bills would give businesses a clearer basis for investment. It would also provide a more durable foundation for the UK's green economy.</p><p>Businesses navigating these changes can access training and support through the <a href="https://sbs.eco/sbs-academy/">SBS Academy</a>, which offers practical guidance on emissions reporting, procurement requirements and energy management.</p><h2>Where to find authoritative guidance and policy detail</h2><p>Businesses seeking detailed information on the Budget should consult the <a href="https://www.gov.uk/government/organisations/hm-treasury">HM Treasury</a> website, which will publish the full Budget documents and supporting analysis. The <a href="https://www.gov.uk/government/organisations/department-for-energy-security-and-net-zero">Department for Energy Security and Net Zero</a> provides policy updates on clean energy, industrial decarbonisation and net zero strategy.</p><p>The <a href="https://obr.uk/">Office for Budget Responsibility</a> will publish independent economic and fiscal forecasts alongside the Budget. The <a href="https://www.resolutionfoundation.org/">Resolution Foundation</a> offers analysis of fiscal policy and its implications for households and businesses. For regional economic development and devolution policy, the <a href="https://www.gov.uk/government/organisations/ministry-of-housing-communities-and-local-government">Ministry of Housing, Communities and Local Government</a> is the primary source.</p>
