Effects of Rachel Reeves’ Spending Review

tiemadmin • 16 June 2025

Chancellor Rachel Reeves delivered her first Spending Review to Parliament last week, setting out the government’s financial priorities for the next three years. Her approach signals a shift away from austerity towards a strategy of state-backed investment, aimed at boosting growth and productivity while maintaining fiscal credibility.

The review promises a substantial increase in capital spending, with key allocations for transport infrastructure, energy security, housing, and green technology. The government pledged a multi-year uplift in NHS and defence funding, while committing to invest heavily in rail, roads, and nuclear energy projects.

Day-to-day departmental budgets are set to grow modestly in real terms, but the largest gains will be in capital allocations. The spending framework also relies on projected efficiency savings of £14 billion, which will be used to fund some of the more ambitious commitments.

For UK businesses, the implications vary by sector. Construction and engineering firms can expect opportunities from increased infrastructure spending, particularly those aligned with green objectives and transport. Firms in digital healthcare, AI, and clean energy technologies may also see a benefit from targeted support and public procurement opportunities.

Technology businesses are likely to see some growth stimulus through investment in digital public services and AI infrastructure. Similarly, the life sciences and carbon capture sectors are expected to benefit from targeted research and development initiatives.

However, the business community remains cautious. The Spending Review comes at a time when government debt is at historically high levels, and market confidence is sensitive to fiscal overreach. Some forecasters have warned of a potential shortfall of up to £20 billion in the government’s medium-term plans, which could necessitate either tax increases or tighter departmental controls later this year.

There is also concern over the government’s reliance on efficiency savings to meet its commitments. While welcomed in principle, businesses and economists alike remain sceptical about how quickly those savings can be delivered in practice.

In summary, the Spending Review presents a growth-focused and investment-driven agenda. For business, it brings opportunities, particularly in sectors aligned with the government’s infrastructure, green and digital priorities. However, there are risks associated with delivering on these promises if forecasts fall short or efficiency measures do not materialise as planned.

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