London’s Economy: Latest News, Updated September 2026

Welcome to our September round-up of the latest developments affecting small and medium-sized businesses in London.

There are some encouraging signs in the economy this month. UK growth has picked up, new business activity in London has improved and consumer confidence in the capital has strengthened.

But the picture is far from straightforward. Borrowing costs remain relatively high, London’s labour market is subdued, and several important tax, Companies House and employment-law changes now require action from business owners.

Here are the developments London SMEs should be paying attention to this month.

Reviewed and updated by: Neil Nichols, Founder of Accounts and Legal

London business activity is improving, but the recovery remains uneven

The latest economic data is more positive than it was earlier in the year.

UK GDP grew by 0.4% in July and by 0.4% across the three months to July. Services, particularly important to London’s economy, grew by 0.6% over that three-month period.

There are encouraging signs within London too. The GLA’s latest London’s Economy Today report showed its PMI new business index rising from 52.6 in June to 52.9 in July. A figure above 50 indicates that businesses are, on average, reporting an increase in new orders. London consumer confidence also improved sharply, rising from 2 in July to 8 in August.

The labour market is less convincing. The GLA estimated London’s employment rate at 73.9% in the three months to June, while unemployment stood at 6.5%. More timely payroll data showed the number of London employees falling by around 0.8% over the year to July. The GLA cautions that some labour-market estimates are volatile, but the overall picture remains one of relatively weak hiring.

What does it mean for you?

For London SMEs, improving headline economic data should not automatically be treated as evidence that your own market is recovering.

Instead, look at the indicators inside your business:

• new enquiries and qualified leads
• sales conversion rates
• average order values
• customer retention
• debtor days
• gross margin
• staff utilisation
• forward bookings or contracted revenue

If your pipeline is improving, decide whether you need more people immediately or whether existing capacity can support the additional work first.

The combination of improving demand and a softer labour market could create opportunities for businesses that have delayed recruitment. However, hiring should still be supported by realistic forecasts rather than an assumption that stronger economic growth will continue.

Interest rates are still at 3.75%, so do not build your forecast around cheaper borrowing

At the time of writing on 15 September, Bank Rate remains at 3.75%. The Bank of England held it there at its July meeting, with the next decision due on 17 September.

Inflation has also moved back up. The latest published ONS figures show CPI inflation increasing from 2.6% in June to 2.9% in July. The August inflation figure is due on 16 September.

The important point for business owners is that a rapid return to very cheap borrowing should not be built into financial plans.

If you use overdrafts, asset finance, invoice finance, commercial mortgages or variable-rate loans, finance costs can still have a meaningful impact on cash flow and profitability.

What does it mean for you?

Review borrowing as part of your forecast rather than waiting until a facility needs renewing.

For example:

• identify which borrowing is fixed and which is variable
• model the interest cost over the next 12 months
• check when loans and facilities need refinancing
• stress-test repayments against weaker sales or lower margins
• compare the cost of borrowing with the return you expect from the investment it is funding

A £500,000 investment that generates a strong, measurable return can still make sense in a higher-rate environment. Borrowing simply because finance is available is a different proposition.

Businesses considering acquisitions, new premises or significant capital expenditure should pay particular attention to this. The purchase price is only part of the decision. Financing costs and the amount of working capital left after the transaction matter just as much.

Making Tax Digital has become a live issue for thousands of business owners

September is particularly important for sole traders and landlords affected by Making Tax Digital for Income Tax.

MTD for Income Tax became mandatory from 6 April 2026 for sole traders and landlords whose combined qualifying income from self-employment and property exceeded £50,000 in the 2024/25 tax year. Qualifying income means gross income before expenses, rather than profit.

HMRC has said that from September it will start signing up people who should already be within MTD for the 2026/27 tax year but have not signed themselves up, where HMRC’s records show qualifying income above £50,000.

Affected taxpayers should already be keeping digital records and submitting quarterly updates through compatible software. The first quarterly update was due on 7 August and the second is due on 7 November 2026. HMRC has confirmed that it will not apply penalty points for late quarterly updates during the 2026/27 tax year, although the updates still have to be completed.

The threshold falls again in future years: qualifying income above £30,000 brings taxpayers into MTD from April 2027, followed by a £20,000 threshold from April 2028.

What does it mean for you?

This change does not mean every limited company with turnover above £50,000 is now subject to MTD for Income Tax.

The rules currently concern individuals receiving qualifying self-employment and property income. That distinction is important for owner-managed companies.

However, a company director could still be personally affected if, for example, they also operate a separate sole-trader business or receive sufficient property income.

If you are in scope, check:

• whether HMRC has already signed you up
• whether your bookkeeping software is MTD compatible
• whether digital records have been maintained from the correct start date
• whether the first quarterly submission has been made
• whether your accountant or tax adviser has the necessary authorisation
• whether you are ready for the next deadline on 7 November

Businesses should treat MTD as a bookkeeping process rather than another job to deal with immediately before a tax deadline. Poor records throughout the year will simply create more work later.

Employers need to prepare for another round of employment-law changes in October

The Employment Rights Act 2025 is being implemented in stages, and another important group of measures comes into force next month.

From 1 October 2026, the normal time limit for bringing an Employment Tribunal claim will increase from three months to six months.

Further measures take effect from 30 October. These include a requirement for employers to take all reasonable steps to prevent sexual harassment and a new obligation on employers not to permit third-party harassment of employees. A range of trade-union rights and protections will also change.

Businesses should also be looking further ahead. From 1 January 2027, the qualifying period for unfair-dismissal protection is due to fall from two years to six months, while compensatory awards are due to become uncapped. Government employer guidance has specifically warned that existing employees, including people recruited from July 2026, may therefore fall within the new regime when it takes effect.

These changes come on top of higher employment costs already introduced in April. The National Living Wage for workers aged 21 and over is now £12.71 an hour, while the main employer National Insurance rate remains 15%.

What does it mean for you?

For employers, September should be a preparation month.

Review your:

• employment contracts
• probation processes
• disciplinary procedures
• grievance procedures
• harassment and equal-opportunities policies
• manager training
• performance documentation
• record keeping around dismissals
• arrangements for dealing with customers, contractors and other third parties

The change to unfair-dismissal rights makes good management particularly important.

A six-month qualifying period gives businesses much less time to identify and deal with poor performance before ordinary unfair-dismissal protection applies.

That does not mean employers should rush employment decisions. It means managers need to set clear objectives, document problems promptly, hold proper probation reviews and follow fair procedures.

Businesses operating in hospitality, retail, events and other customer-facing industries should also consider the expanded third-party harassment requirements carefully because employees regularly interact with customers, suppliers and contractors.

Companies House identity verification is moving further into normal company administration

Identity verification at Companies House became a legal requirement from 18 November 2025, when a 12-month transition period began.

One important point is often misunderstood: 18 November 2026 is not a single deadline by which every existing director simply has to verify their identity. The date on which action is required depends on the person’s role and filing timetable.

Existing directors generally need to provide their Companies House personal code as part of their company’s next confirmation statement.

People with significant control, or PSCs, have separate requirements. A director who is also a PSC must provide their personal code separately for each role, including through the PSC identity-verification service during the applicable 14-day period.

If someone is a director of several companies, they normally verify their identity once and receive one personal code, but that code still needs to be provided for each relevant appointment.

What does it mean for you?

Do not leave this solely to whoever happens to file the annual confirmation statement.

For businesses with several shareholders, directors or group companies, establish:

• who needs to verify
• who has already verified
• each director’s personal code
• each company’s next confirmation statement date
• which individuals are also registered as PSCs
• who is responsible for submitting the relevant information

If you have a group structure containing several companies, one missed filing requirement can quickly become an unnecessary administrative problem.

September is a sensible point to review the whole group rather than dealing with each company at the last minute.

Business rates remain a significant issue for London premises

The 2026 business-rates revaluation came into effect on 1 April, based on rental values as at 1 April 2024.

The system also changed for retail, hospitality and leisure businesses. Instead of the previous annual retail, hospitality and leisure relief, qualifying properties with rateable values below £500,000 now use permanently lower RHL multipliers. For 2026/27, these are 38.2p for qualifying properties with rateable values below £51,000 and 43p for qualifying properties from £51,000 to £499,999.

London businesses also need to remember the Crossrail Business Rate Supplement. From April 2026, this 2p supplement applies only to London non-domestic properties with a rateable value above £92,000, up from the previous £75,000 threshold. The GLA estimates that almost 87% of London properties are consequently outside the supplement.

Businesses based in the City of London should check the City-specific calculation rather than automatically using the general England multipliers.

There is also a new development for London’s hospitality sector. In August, the Treasury launched an independent review into how pubs and hotels are valued for business rates following significant increases in rateable values at the 2026 revaluation. Businesses can submit evidence until 16 October 2026. Importantly, however, the review will not alter current 2026 rateable values; any accepted recommendations are intended for a future revaluation.

What does it mean for you?

If your rates bill increased materially this year, do not simply compare this year’s cash bill with last year’s.

Check:

• your new rateable value
• which multiplier has been used
• whether you qualify for relief
• whether transitional arrangements apply
• whether the property information held by the Valuation Office is correct
• whether the Crossrail supplement applies
• whether your budget accurately reflects the full annual cost

If you think the rateable value itself is wrong, there is a formal Check, Challenge and Appeal process. You normally need to complete the Check stage before progressing to a Challenge.

For pubs and hotels, the new review also creates an opportunity to provide evidence about how the valuation system affects your business. Just do not mistake the review for immediate relief from a current bill.

The Budget is on 28 October, so now is the time to build scenarios

The government has confirmed that the next Budget will take place on Wednesday 28 October 2026.

There will inevitably be speculation about tax changes before then. Business owners should be cautious about making significant decisions based on rumours.

What you can do now is make sure you understand your current position well enough to respond quickly once the announcements are confirmed.

What does it mean for you?

Before Budget day, update your forecast and identify the numbers most sensitive to policy changes.

For many owner-managed businesses, that means understanding:

• annual payroll costs
• planned recruitment
• capital expenditure
• corporation tax forecasts
• director remuneration
• dividend requirements
• borrowing and refinancing
• property costs
• business rates
• planned acquisitions or disposals
• personal tax liabilities for shareholders

You do not need to predict what the Chancellor will announce.

Instead, have a base forecast and enough flexibility to model alternative scenarios once the actual measures are known.

That is particularly important if you are planning a large dividend, investment, recruitment programme, property transaction or business sale before the end of the financial year.

Free London business support is still available

London businesses looking for external support can also use Grow London Local, the Mayor-backed service delivered by London & Partners.

It provides London small businesses with free access to business-support programmes, consultations, events and guidance covering areas including finance, sales, digital development, legal issues and business planning. Its Grow London Local Money service also provides support around grants, lending, crowdfunding, investment and other funding routes.

For businesses considering external finance, that support may be useful. But funding should follow the business plan rather than become the plan itself.

Before approaching lenders or investors, you should be able to show clearly how much capital you require, what it will fund, what return you expect and how the business performs if growth comes in below forecast.

Final thoughts for London business owners

September’s picture is more positive than it was a few months ago, but it would be premature to treat the pressure on SMEs as over.

Economic growth and London business confidence are moving in the right direction. At the same time, employment remains soft, borrowing is still relatively expensive and employers are absorbing higher wage and payroll costs.

More immediately, business owners have a growing compliance list.

Sole traders and landlords affected by Making Tax Digital need to make sure their digital records and quarterly reporting are working. Company directors and PSCs need to understand their Companies House identity-verification dates. Employers should prepare for the October employment-law changes rather than waiting for a dispute to expose gaps in their procedures.

And with the Budget scheduled for 28 October, good financial information will become even more valuable.

For SME owners, the priority should therefore be visibility: knowing your cash position, margins, payroll cost, tax exposure and forecast well enough to respond when conditions change.

If you run a business in London and want clearer visibility over your numbers, our accountants in London can help with bookkeeping, payroll, tax, management accounts, cash-flow forecasting and strategic advice.

Speak to Accounts and Legal today to find out how we can support your business.

Reviewed and updated by: Neil Nichols, Founder of Accounts and Legal