New PM, new rules? What Burnham’s business rates, VAT and housing changes mean for commercial mortgages, development finance and business lending in 2026.
Seven prime ministers in ten years. That’s where we are. Andy Burnham walked into Number 10 on 20 July, unopposed, after Keir Starmer stood down in June.
I had a client on the phone within about a fortnight of it happening. Small engineering firm, two units on an industrial estate near Crawley, looking to buy the freehold on the second one. His question wasn’t about politics. It was simpler than that: “Does any of this change whether I can borrow?”
Fair question. And the honest answer is that a change of prime minister rarely changes lending overnight. What it changes is the weather – and lenders are very good at reading the weather. I’ve written before about how global events feed through into property finance costs, and a new government is just another of those events.
So here’s what’s actually happened so far, what’s coming, and what it means if you’re buying commercial property, building something, or just trying to fund a business.
Two things have moved from talk to policy.
VAT comes off domestic electricity bills from 1 October. That was Burnham’s first big announcement. Worth knowing that it also catches non-VAT-registered small businesses and charities – so if you’re below the VAT threshold and running a workshop, a salon or a café, that’s a real reduction in your energy costs rather than a headline.
Second, business rates. Burnham has announced a 20% cut for roughly 32,000 pubs, clubs and live music venues, due to come in from April 2027. The typical business saves around £1,100 in the first year. It costs about £100m annually and is being paid for by reviewing reliefs given to businesses the government reckons don’t contribute much locally.
There’s more on the table but not yet confirmed. Colliers has set out the fuller picture: raising the threshold at which you start paying business rates from £12,000 to £18,000, and extending tapered relief from £15,000 to £21,000. ITV News reported in July that the wider high street package could cost in the region of £880m. Chancellor John Healey has said the pubs cut is “just one step” and that broader reform, including small business rates relief, comes at the Autumn Budget.
That Budget is on Wednesday 28 October. Diary it. Saffery has a decent plain-English summary of what’s being trailed if you want the detail.
Business rates aren’t a side issue when you’re buying commercial property. They’re part of the affordability sum, and they feed straight into what a tenant will pay you in rent.
If rates come down meaningfully for small retail and hospitality, two things tend to follow. Occupier demand on secondary high streets improves, because the total cost of being there drops. And where occupier demand improves, lenders get more comfortable with the rental income underpinning a commercial mortgage. A vacant unit in a town centre is a very different proposition to one with a tenant on a five-year lease who can actually afford the rent. If you’re buying a tenanted commercial building, it’s also worth understanding how the Landlord and Tenant Act 1954 shapes lender appetite – that one catches people out regularly.
The other piece worth watching is devolution. From spring 2027, mayors are expected to retain a greater share of locally generated revenue, starting with business rates. The House of Commons Library has a useful briefing on how far that might go. If it happens properly, where you buy will matter more than it currently does. Different mayoral authorities will make different choices about reliefs, regeneration and what they want on their high streets. Property Week’s view is that the system is crying out for wholesale reform rather than tinkering, and I’d agree.
And in the background, the minimum EPC rating of B for larger non-domestic properties from 2031 hasn’t gone anywhere. Lenders have already started pricing it in – BNP Paribas Real Estate’s July briefing picks up the same theme on occupier demand for efficient space. I’ve seen deals where the difference between an EPC C and an EPC E changed both the rate and the loan-to-value on offer. That’s not a future problem. That’s a today problem, five years early.
Burnham has made council housing his stated top priority. Public land released at a discount to bring build costs down, more development corporations, and a push for higher residential density in town centres rather than eating into green belt. Centre for Cities has a good briefing on the housing and planning agenda if you want the policy detail.
For a small developer, this is a mixed bag and it’s worth being clear-eyed about it.
The opportunity is real. More public land coming forward at a discount, and development corporations with a mandate to get things moving, generally means more sites and fewer years of planning purgatory.
Town centre density plays well for anyone comfortable with conversions and infill — smaller, awkward urban sites that the volume builders won’t touch. That’s exactly the sort of scheme we fund with development finance.
The risk is that the emphasis sits heavily on council and affordable housing, and the numbers on those schemes work differently. Margins are thinner. Your exit is often a bulk sale to a registered provider rather than individual open-market sales.
Lenders will look at that exit very carefully, because it concentrates all your risk in one counterparty. If your sales run slower than planned, development exit finance can take the pressure off — but it’s far better to have thought about it at the start than to be arranging it in a panic. And if the equity is the sticking point rather than the debt, it’s worth reading up on what joint venture finance actually involves, because most of what people think they know about it is wrong.
Development finance isn’t a lump sum, remember. It’s more like a running tab — money drawn down in stages as the build progresses, with the lender’s monitoring surveyor signing off each stage. That structure keeps everyone honest, but it also means your funder is effectively re-underwriting your project every few months. If your exit route shifts halfway through, they will notice.
Here’s the bit that matters more than any of the above.
The Bank of England held the base rate at 3.75% on 30 July – the fifth hold in a row. Inflation is running at 2.6%. The next decision is 17 September. Nobody in Threadneedle Street is doing anything dramatic while a new government works out what its Budget looks like.
Stable is good. Stable means lenders can price. And bear in mind that base rate isn’t what actually sets the cost of a fixed commercial loan – swap rates do, and they move on things that have nothing to do with Westminster.
When rates were bouncing around, offers were being pulled and repriced constantly, and I spent a lot of 2022 and 2023 apologising to clients for things that weren’t my fault. That’s largely stopped.
The lending market itself is also in better shape than the mood music suggests. The British Business Bank’s Small Business Finance Markets Report 2026 found gross bank lending to smaller businesses rose 9% to £68bn in 2025 – the second highest figure in thirteen years, behind only the Covid spike.
The Growth Guarantee Scheme has been expanded by £6.5bn, expected to support around 33,000 businesses over four years. It’s not just for new borrowing either – you can use it to refinance and reset existing debt, which very few business owners realise.
The stat I’d really pull out, though, is this one: challenger and specialist banks accounted for 60% of gross SME bank lending in 2025, up from 39% in 2012.
Think about what that means. If you walk into your high street bank and get a no, you have just heard from 40% of the market. Most business owners don’t know that. I find myself explaining it two or three times a week, and it’s a fair chunk of what a broker is actually for.
I left banking because of 2008. I watched facilities that had been agreed with decent, solvent businesses get pulled overnight, and I watched people who’d done nothing wrong lose things they’d spent twenty years building. That’s why Lime exists, and it’s why I get twitchy when politics gets noisy.
But I’ve now watched seven prime ministers come and go while doing this job. Deals still complete. Good businesses still get funded. The lenders who were sensible in 2019 are broadly the sensible ones now.
My daughter works in construction – health and safety, asbestos specialism – and she’s got a similar view of it from the site side. Governments change. The building still has to get built, and somebody still has to do it properly.
Three things.
Don’t wait for the Budget to start a conversation. If you’re buying, refinancing or building in the next six months, get your position understood now. Agreements in principle take time, and 28 October will be followed by a rush. I’ve made this argument before and it hasn’t got less true: the “wait and see” strategy usually costs more than it saves.
Look at your EPC before your lender does. On a commercial building, that’s fast becoming a pricing issue rather than a compliance one.
And if you’ve had a no from your bank, treat it as one opinion, not a verdict. Sixty per cent of the market is somewhere else.
None of us knows what’s in the October Budget. What I do know is that the businesses who get funded well are the ones who started the conversation early, not the ones who waited for certainty that was never coming.
If you want to sketch out the numbers first, our calculator will give you a rough shape. And if any of this lines up with where you are right now, I’m always happy to have that conversation.
David Farmer Lime Finance Solutions
Not directly, and not overnight. Lenders set their criteria on risk, funding costs and their own appetite, none of which change the day someone walks into Number 10. What a new government does affect is confidence and the tax backdrop, and those feed through over months rather than days. If your deal stacked up in June, it almost certainly still stacks up now.
Two things so far. VAT comes off domestic electricity bills from 1 October, which also benefits small businesses that aren’t VAT registered. And a 20% business rates cut has been announced for around 32,000 pubs, clubs and live music venues from April 2027, worth roughly £1,100 a year to a typical site. Wider business rates reform is expected at the Budget.
Wednesday 28 October. It matters because Chancellor John Healey has said the business rates announcements so far are only a first step, with fuller reform — including small business rates relief and mayoral revenue retention — still to come. Business rates affect what tenants can afford to pay, and rental income is what underpins most commercial property lending.
Potentially, yes. Lenders size a loan against sustainable rental income. If occupier costs fall, tenants are more likely to stay and pay, and lenders take more comfort from that income. It’s an indirect effect rather than a switch being flicked, but on secondary high street stock it can be the difference between a deal working and not working.
Far from it. Challenger and specialist banks made up 60% of gross lending to smaller businesses in 2025, up from 39% in 2012. A no from your high street bank is one lender’s view of your file, not the market’s. Very often the deal simply needs presenting differently, or taking to someone whose criteria actually fit.
I wouldn’t. Agreements in principle take time, valuations take longer, and there will be a queue after 28 October. Getting your position properly understood now costs you nothing and puts you in front of that rush. If the Budget changes something material, you adjust — but you adjust from a standing start rather than a cold one.
No. The base rate has been held at 3.75% for five consecutive meetings and inflation is running at 2.6%, so pricing is stable and lenders can quote with confidence. Stability is worth more to a development appraisal than a marginally lower rate. The bigger risk is waiting for a certainty that never arrives while your costs creep up.
Figures correct as at 6 August 2026. Policy positions marked as proposed remain subject to confirmation at the Autumn Budget on 28 October 2026.
Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.
Tel: 01293 541333
Email: hello@lime-fs.com
Tel: 0207 866 2102
Email: hello@lime-fs.com
Tel: 01293 541333
Email: hello@lime-fs.com
Tel: 0207 866 2102
Email: hello@lime-fs.com
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