18th March 2026
Like private businesses the public sector face the significant price increases from Microsoft.
A Highland Council spokesman said: "Highland Council, along with other public sector organisations, benefits from reduced pricing for Microsoft products through a government agreement.
We have just entered into a new 3-year enterprise agreement with Microsoft which means we have protected pricing for that period. The agreement started on 1st January 2026. Indicative pricing is shown below based on current volumes of licences, with actual costs based on the actual volumes of licences we consume in future years.
Year 1 - £1,784,461
Year 2 - £1,861,416
Year 3 - £1,901,197
“The year 1 cost is in line with the budget for the previous year and the cost increases for years 2 and 3 are also in line with expected general inflationary increases for software contracts. We did see a significant price increase in Microsoft licensing 3 years ago and budget provision was made by the Council at that point to cover it as the software is essential for operations."
Licences Most Councils Use — All Increasing
Councils typically rely on:
Microsoft 365 E3 / E5
Office 365 E1 / E3
Frontline (F1/F3) licences for social care, education, and field staff
Security & compliance add‑ons (Defender, Intune, Purview)
All of these are included in the July 2026 commercial price rise, with some frontline plans seeing increases up to 33%.
Budget Impact
For a council with thousands of staff:
Even a 4-10% rise on core licences can add hundreds of thousands of pounds annually.
Frontline licence increases (up to 33%) hit social care, education support, and facilities teams hardest.
Security add‑ons (Defender, Intune) rising in parallel increases the total cost of ownership.
Operational Impact
Renewal timing becomes critical — renewing before 1 July 2026 may lock in lower pricing.
Councils may need to:
Rebalance E3 vs E5 usage
Audit unused licences
Consolidate overlapping security tools
Review frontline worker allocations
How the 2026 Price Increases Affect NHS Highland
NHS organisations have a special national agreement with Microsoft (NHSmail / O365 E3R), which was updated in 2024. This means the impact is different from councils.
NHS Has a National Licensing Deal
NHS England and Microsoft renegotiated the NHSmail licensing model in 2024.
The old O365 E3R (Restricted) licence was replaced with a new national bundle.
This gives NHS bodies more predictable pricing than commercial customers.
Will NHS Highland Still Be Affected?
Yes — but not as sharply as councils.
Why:
The NHS national agreement shields organisations from the full commercial price rises.
However, when Microsoft increases the underlying commercial price list (as in July 2026), the national contract cost base also rises.
NHS Highland will see:
Higher costs for top‑up licences (e.g., E5 Security, Defender, Intune)
Higher costs for non‑NHSmail licences (e.g., local service accounts, specialist roles)
Increased costs when the national agreement is next renegotiated
Frontline Worker Impact
NHS Highland has a large number of:
Nurses
HCAs
Community care workers
Estates & facilities staff
These roles often use F1/F3 licences, which are among the SKUs with the largest percentage increases (up to 33%).