Budget 2026 Offers ‘No Breathing Space’ For Food, Farming, And Retail
Chancellor John Healey’s first Budget has been met with criticism from the food, farming, and retail industries as a crucial missed opportunity to deliver on the UK Government’s ‘food security is national security’ commitment.
Both the National Farmers Union (NFU) and the British Retail Consortium (BRC) said the autumn budget offers “no breathing space” for farmers and retailers alike, while the Food and Drink Federation (FDF) warned it “offers nothing” to ease food price pressures.
Among the announcements made on 28 October, there will be no further u-turn on the farm inheritance tax reform.
For farmers and growers there was also no extension of the Annual Investment Allowance to include infrastructure such as on-farm reservoirs, nor any action to ease the cash flow crisis impacting farming and food businesses.
However, the temporary agricultural red diesel duty reduction and the wider 5p-per-litre fuel duty cut will be extended through July 2027 to help combat high energy and input costs.
On business rates, Chancellor Healey revealed that the small business rate relief threshold will rise from £12,000 to £18,000 rateable value.
For two years the government will also freeze business rates bills in real terms for qualifying retail, hospitality, and leisure properties.
Employment-wise, the National Minimum Wage for 18- to 20-year-olds and the National Living Wage will be increased by 3.9% from April 2027 for 2.3m of the lowest paid workers.
Earlier this week Chancellor Healey also announced a series of tariff cuts on selected imports including fertilisers, as well as 100 everyday imported food items, including garlic and gherkins.
The tariff cuts are designed to support farmers, ease pressure on household spending, and reduce costs for some importers but the effectiveness of the move has been questioned by the industry.
Farmers Left Feeling Abandoned
The NFU said the government had failed to act on its “warm words” this summer, leaving farmers “feeling abandoned”.
“The government has failed to link domestic food production to food-price inflation, has missed the opportunity to deliver on its commitment that ‘food security is national security’ and failed to give farm businesses the ‘breathing space’ that the Chancellor said that this Budget was for,” blasted NFU President Tom Bradshaw.
“While the extension to the red diesel relief is welcome, fuel prices today are 65% higher than a year ago, so will offer minimal relief to the cashflow crisis facing farming businesses. This feels like tinkering while Rome is burning.
“Action could have been taken on extending the Annual Investment Allowance to include infrastructure such as on-farm reservoirs or new poultry housing, action could have been taken to ease the dire cash flow impacting farms and our food producing businesses, and action should have been taken to reverse the investment-stifling family farm tax,” Bradshaw added.
“Ignoring these actions means that the bottlenecks holding back domestic food production and the overall confidence of the sector have not been addressed. It’s failed to respond to the concerns of those across retail, food manufacturing and the wider supply chain serving 29 million households.”
Tariff Cuts Fall Short
The day before the Budget, Chancellor Healey announced a series of tariff cuts on items including fertilisers, but the NFU said the measures are unlikely to benefit farm businesses or household food bills in any meaningful way.
NFU’s Bradshaw said fertiliser costs are influenced by much bigger market factors, and added that that any savings will depend on whether reductions are passed through the supply chain and whether the specific fertiliser products covered are those used by UK agriculture.
Chancellor Healey said tariffs will be also removed on 100 everyday food items, including garlic, gherkins and baked beans, as well as some confectionary, fruit spreads, and plant-based milks.
However, the NFU pointed out that almost 90% of the UK’s food imports enter the country duty-free already, including those from European Union countries, Egypt, and Algeria, meaning the tariff cuts will leave the vast majority of imports unaffected.
The BRC noted that the tariff cuts will “barely touch the sides” in offsetting the rising costs supermarkets face, even on the “limited number” of products affected.
While the tariff removal will have no meaningful impact on consumer prices, the FDF warned it will undermine British factories and their workers, who are grappling with much higher costs and producing the same products.
“As we have said repeatedly, strengthening domestic food production is the best way to improve food security and cost of living pressures,” NFU’s Bradshaw commented.
Retail Costs Keep Climbing
The BRC reacted with disappointment to the budget, pointing out that both business rates and employment costs will continue to rise, meaning less money for investment in jobs, stores, and keeping down prices.
“This was a smoke and mirrors announcement on business rates,” stated Helen Dickinson, BRC’s Chief Executive.
“The Chancellor’s headline announcement that he will ‘freeze [retail, hospitality and leisure] rates in real terms’ means a 3.5% increase – another body blow to high streets already struggling with rising costs and empty units.
“It will add around £250 million to retailers’ bills next April as one in seven shops lies empty,” she added.
On employment costs, BRC’s Dickinson said the Chancellor has “squandered” a crucial opportunity to start tackling the growing youth employment crisis, while adding another £2 billion on top of the £6.5 billion in additional employment costs that retailers have faced over the last two years.
“The above-inflation increase in the National Living Wage, combined with the lack of any reduction to employer National Insurance Contributions (NICs), will add further pressure on retail jobs,” she said.
On energy costs, while businesses will welcome the future de-linking of gas and electricity prices, the BRC said the budget fell short of what retail businesses need.
“The industry’s electricity costs are expected to rise by £440 million this year despite almost no change in usage,” Dickinson pointed out.
“With non-commodity charges now making up around two-thirds of bills, the Chancellor should have gone further to extend the British Industrial Competitiveness Scheme to retail and its supply chain, and to stop these Government-driven costs finding their way into prices at the checkout.”
The FDF agreed that the budget does nothing to address the acute pressures faced by food and drink manufacturers.
“Very high energy costs combined with overly complex regulation is turning investment away from our sector and to competitors overseas,” noted Karen Betts, FDF’s Chief Executive. “This is eroding confidence across the entire food system.”
For small retailers, however, raising the rates relief threshold was welcomed by the Association of Convenience Stores (ACS) considering that “thousands of small shops” will no pay no rates at all. It said this would protect jobs and encourage investment.
Read the Budget in full here.
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