Budget 2026 and the West Midlands: business rates retention, growth funds and what devolution means for Birmingham businesses buying premises

Budget 2026 gives England's mayors a direct share of business rates from April 2027, a new pot of seed money for local investment funds, and a £1.5bn borrowing facility that can lend on concessional terms. For a Birmingham or wider West Midlands business deciding whether to buy its own premises, these measures shape the local economy more than they change any single deal, but the direction is worth understanding. This article sets out what the Budget actually says about regional growth and devolution, what it says about the West Midlands specifically, and what that means for owner-occupiers.

The fiscal devolution roadmap in brief

The central change is how regional government is funded. The Budget's Fiscal Devolution Roadmap includes "income tax assignment for all Mayors beginning in 2028" and "Mayors retaining a 20% share of locally retained business rates from next year" (Budget 2026, para 4.60). Over the longer term, the government "intends for local and regional government to retain 100% of business rates income before the end of the decade in place of grants from central government, with the share retained by local authorities increasing to at least 70%", starting "with MSAs receiving a 20% share of business rates from April 2027" (Budget 2026, para 4.66).

For a business owner this is not a change to the bill. Rates are still assessed and collected in the same way. What changes is who keeps the money. When a combined authority keeps a direct share of business rates, it has a financial reason to see more commercial floorspace built, let and occupied in its area. Over time, that tends to shape where public investment, transport and regeneration effort go.

Business Rates Retention Zones: the West Midlands is not in the first wave

The Budget names the first wave of Business Rates Retention Zones: Greater Manchester, East Midlands, Hull and East Yorkshire, Liverpool City Region, Tees Valley, West of England, North East, York and North Yorkshire, and the Greater London Authority (Budget 2026, para 4.61). Within a zone, "the relevant billing authorities can retain 100% of business rates growth above an agreed baseline for 25 years" (Budget 2026, para 6.43).

The West Midlands is not on that list. The document does say the government "remains open to receiving proposals from Mayoral Strategic Authorities who did not put one forward as part of this wave" (Budget 2026, para 4.62). So a West Midlands zone is possible in future, but nothing in this Budget creates one. Owners reading coverage of retention zones should not assume they apply in Birmingham today.

What the Budget says about the West Midlands

The regional spotlight in Box 4.D of the Budget gives the West Midlands a short section. It says the Mayor "is driving regeneration through the Birmingham East Mayoral Development Corporation, which aims to deliver 50,000 jobs and 20,000 homes". It also says the West Midlands Investment Zone "is supporting advanced manufacturing through sites like Green Power Park in Coventry", and refers to the Black Country Metro extension into Dudley, the transformation of Wolverhampton city centre and the Midlands Rail Hub (Budget 2026, Box 4.D). Outside the metropolitan area, £10 million from the Growth Mission Fund will support the refurbishment of Stafford Market Hall and an SME business incubation hub, subject to final business case.

The West Midlands is also one of the areas with City Investment Funds, described as "grant, loan and patient capital funding for mayors ... to deliver city densification at a local level" (Budget 2026, para 6.45).

Note what this is and is not. These are statements of direction and ambition, not new money for individual businesses. The 50,000 jobs and 20,000 homes for Birmingham East are aims, not forecasts.

Good Growth Funds and the £1.5bn borrowing facility

Two measures could, in time, reach local businesses more directly:

• Good Growth Funds. The government confirms "£285 million in 2027-28, comprising £165 million to support places with a mayor in place in 2027 to establish Good Growth Funds and £120 million of incubator capital funding" for areas moving towards devolution (Budget 2026, para 4.64). The aim is to "invest in catalytic regeneration and development".
• A borrowing facility for mayors. A "bespoke borrowing facility of £1.5 billion for MSAs" will be "operational by April 2028" and will "include mechanisms to enable concessional lending to support a broad range of locally determined projects" (Budget 2026, para 4.65).

How these funds will be split between areas, and whether any of the money will be lent to private businesses for property, is not set out. Treat them as a signal that more regeneration capital will be managed locally from 2028, not as a source of funding for a premises purchase.

The national measures that matter more to an owner-occupier

For most Birmingham business owners buying a building, the national measures will have a bigger direct effect than the regional ones.

Capital allowances. The main rate first-year allowance rises to 50% for expenditure on or after 1 January 2027, and the main rate writing-down allowance falls to 12% from April 2027 (Budget 2026, para 6.251). Full expensing is maintained and the headline corporation tax rate is capped at 25% (Budget 2026, para 2.54). For a manufacturer or engineering firm fitting out a newly bought unit, how plant and machinery spending is treated is worth working through with an accountant.

Energy costs for manufacturers. "From April 2027, the British Industrial Competitiveness Scheme will support over 10,000 eligible manufacturers in Great Britain, cutting their electricity bills by up to 25%" (Budget 2026, para 4.24). Many of the region's metal, automotive supply chain and precision engineering firms will want to check eligibility, because lower operating costs improve the trading figures a lender assesses.

Business rates for shops and hospitality. From 1 April 2027 retail, hospitality and leisure properties in England with a rateable value up to £18,000 get 100% Small Business Rates Relief, tapering to £21,000 (Budget 2026, para 6.190). For independent traders in the Jewellery Quarter, Digbeth, Moseley or Harborne, that can remove the rates bill altogether.

Wages. The National Living Wage rises by 3.9% to £13.21 an hour on 1 April 2027 (Budget 2026, para 6.128), which affects labour-intensive businesses most.

Business finance. The British Business Bank gets £5 billion of extra capacity, including a £6.5 billion expansion of the Growth Guarantee Scheme (Budget 2026, para 4.46), and will design the next generation of Nations and Regions Investment Funds with Mayoral Strategic Authorities (Budget 2026, para 4.145). The Budget does not say whether Growth Guarantee Scheme lending can be used to buy property.

Why regeneration matters when you buy

When a business buys its premises, it is taking a long position on its location as well as its trade. Regeneration and transport investment can make an area busier, better connected and easier to recruit in. None of that is guaranteed, and a lender will not lend more because of a regeneration plan. Lenders assess an owner-occupier loan on the business's own trading, usually EBITDA cover over the repayments, plus a professional valuation of the building as it stands today.

What regional policy can do is shape the decision about where to buy. A business choosing between two units in different parts of the conurbation may reasonably give weight to where public investment is going, as long as the purchase works on today's numbers alone.

Illustrative example. A Black Country engineering firm leases its factory unit and is offered the freehold. The firm could also move to a newer unit nearer a planned transport improvement. The sensible approach is to test both options on current trading and current valuations first. If both are affordable, regeneration plans, energy cost support and the timing of capital allowances can then help choose between them. The example is hypothetical and for illustration only.

What to do now

1. Model the purchase on today's figures. Use filed accounts and current management figures. A deal should work without assuming any regional benefit arrives.
2. Check scheme eligibility. Manufacturers should look at the British Industrial Competitiveness Scheme; retail and hospitality owners should check the new rates relief thresholds.
3. Time fit-out spending with advice. The capital allowance changes take effect at different dates in 2027, so ask an accountant before committing to major plant purchases.
4. Follow the combined authority. Watch for announcements on Good Growth Funds, the borrowing facility and any future retention zone proposal for the West Midlands.
5. Prepare a lender pack early. Two to three years of accounts, a clear explanation of trading, and details of the property make an owner-occupier application much faster.

Key dates

• 28 October 2026: Budget 2026 published
• 1 January 2027: 50% main rate first-year allowance starts for qualifying spending
• April 2027: Mayoral Strategic Authorities receive a 20% share of business rates; BICS support starts; writing-down allowance falls to 12%; RHL rates relief thresholds rise; National Living Wage rises to £13.21
• 2027-28: £285m of Good Growth Fund seed funding
• April 2028: £1.5bn MSA borrowing facility operational; mayoral income tax assignment begins in 2028

Brought to you by Business Mortgages Broker

Business Mortgages Broker arranges owner-occupier business mortgages for UK trading companies that want to buy, own or refinance their premises. Founder Matt Lenzie has 25 years in financial services, raising debt and equity, and has arranged around £400m of property finance. For Birmingham businesses weighing up buying a building, see business mortgages in Birmingham.

Source: HM Treasury, Budget 2026 (HC 726), 28 October 2026.

This article is general information only and is not tax or financial advice.