Budget 2026: Who might be the winners and losers?

The central question for the Budget is not whether the Chancellor can create winners, but how narrowly any support will be targeted and who will pay for it. With borrowing costs eroding the fiscal buffer and the main rates of income tax, employee National Insurance and VAT politically constrained, broad-based tax cuts look difficult without offsetting tax rises, spending reductions or additional borrowing.

The more likely outcome is a targeted package that shifts resources towards strategic priorities while asking other households, sectors and departments to carry more of the burden.

The prospective winners are therefore those aligned with the government’s strategic priorities; the likely losers are those asked to fund them, directly through tax or indirectly through tighter departmental budgets.

The clearest spending winners are businesses aligned with the Defence Investment Plan. Prime contractors should benefit, but so could UK suppliers in drones and autonomous systems, munitions, secure communications, space, shipbuilding, nuclear capability, software and specialist engineering.

The opportunity is potentially broader than the £15bn increment: a £297.7bn four-year envelope and a rising NATO target create a longer pipeline for firms able to meet security, resilience and UK-content requirements. The constraint will be procurement capacity and whether capital taken from other departments simply displaces demand elsewhere.

Even a phased NCS would direct more public funding towards domiciliary care, care homes, workforce training and care technology. The £500m first-year Fair Pay Agreement is an immediate gain for lower-paid workers and could help recruitment and retention.

Providers may benefit from higher fee income, although part of it will be absorbed by wages and compliance costs; without multi-year funding, smaller operators could remain exposed to a promise that raises costs before commissioning rates catch up.

Temporary, targeted support is more likely than a universal subsidy. Firms in chemicals, ceramics, glass, steel and other energy-intensive activities could benefit if help is tied to efficiency, decarbonisation or continued UK production.

Households may gain from the temporary zero rate of VAT on domestic electricity and focused cost-of-living support, but a six-month VAT reduction is relief rather than a permanent tax cut.

Business-rates relief from April 2027 could favour customer-facing community venues with high property costs.

A Budget built around devolution may also shift funding towards mayoral transport, housing, skills and regeneration programmes. Construction, engineering, local professional services and businesses located around successful projects could benefit, although the economic value will depend on whether funding is genuinely additional and allocated to schemes that can be delivered quickly.

The most valuable pro-growth outcome may be continuity rather than a new giveaway. Reaffirming the 25% corporation tax cap, full expensing and the Annual Investment Allowance would give capital-intensive businesses greater certainty.

A targeted extension of investment incentives, particularly for automation, energy efficiency or R&D, would favour manufacturers, technology firms and infrastructure supply chains. But the benefit would be weakened if new sector levies or employer costs offset it.

Defence funding already assumes £4bn from one-per-cent reductions in departmental capital budgets, alongside £2bn from energy and £800m from transport.

Unless the Budget finds a new revenue source, local government, transport, net-zero programmes and other infrastructure budgets may bear further restraint. The risk is that funding immediate security and care pressures by cutting capital investment saves cash today but lowers growth and tax receipts tomorrow.

If the largest tax rates remain unchanged, the Treasury is more likely to look to capital gains, property, inheritance and pension reliefs. Higher-rate taxpayers may also lose through continued threshold freezes: fiscal drag can raise substantial revenue without a headline rate increase.

Reform of the pension triple lock after 2030 would help fund social care but would reduce the pension growth that future retirees would otherwise receive. These measures would be presented as broadening the base or reallocating support, but they would still create identifiable losers.

Banks, energy companies and other sectors seen as earning excess or resilient profits may face pressure for levies, while employers will watch for changes to reliefs, business rates and labour costs.

More HMRC compliance activity and an e-invoicing roadmap would benefit tax-administration technology providers but impose implementation costs on smaller firms. The danger is cumulative: individually modest measures can still deter hiring and investment when layered onto high financing and energy costs.

A reduction in corporation tax, employer NI or the main VAT rate looks difficult to reconcile with the defence and care promises and the need to rebuild headroom. The government may instead recycle smaller revenue raisers into tightly targeted relief. That can create visible sectoral winners, but it is not the same as lowering the overall tax burden or the cost of employing people across the economy.

The central dividing line is therefore likely to run between activities the government regards as strategic, such as national security, care, household energy resilience and regional regeneration, and those expected to release resources or contribute more tax.

For business, the strongest opportunities will sit where public spending priorities and private investment overlap.

For the wider economy, however, the biggest potential winner would be credibility: if a convincing package reduces gilt yields, the resulting fall in financing costs could support households, businesses and the Exchequer more broadly than any narrowly targeted Budget giveaway.