Budget 2025

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As the Chancellor warns that Britain should prepare for “hard choices”, the upcoming Budget is shaping up to be one of the defining tests of her tenure. Rachel Reeves faces an environment characterised by slow growth, higher costs of debt-servicing, and public expectations that things were meant to be better than this. The Chancellor is facing into these issues with her scope for policy movement extremely limited.

The backdrop is not forgiving:

Productivity growth is weak, constraining the size of the tax base and limiting the capacity for expansion.
Government borrowing and interest payments remain elevated, meaning that any significant increase in spending, or cut in taxation, carries real market risk.
Ambitions for infrastructure investment and improved public services are being set against the immediate need to stabilise the public finances.
Commentary has already drawn parallels with Denis Healey’s 1975 “horror Budget” — a reminder of what happens when political expectations and fiscal constraints collide.

Reeves therefore seeks to achieve two things in the upcoming budget: retain/regain economic credibility and shift the political narrative back to optimism. This budget is likely the last chance in this parliament for Labour to shift direction and not simply manage decline. Yet any move that appears risky or loosely costed could trigger the very market instability her approach to date has sought to avoid.

For businesses, a few themes are likely to be central:

Tax policy: With limited headroom, expect targeted measures rather than sweeping rate changes — adjustments to reliefs, allowances or thresholds are more likely than headline cuts.
Investment narrative: The test will be whether infrastructure, innovation and the energy transition are prioritised in a way that is believable, even if fiscal capacity is tight.
Delivery signals: Markets and firms will be watching for concrete steps on planning reform, skills and regulatory efficiency — areas where progress has been slow but the prize is significant.

Over the coming days, attention will turn to the OBR forecasts, the sequencing of policy announcements and the tone set around growth. For businesses, the essential question remains: what does this mean for investment decisions, hiring plans and future strategy?

We will provide detailed analysis once the Chancellor has spoken — focused on what changes, what it means, and what happens next.

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