UK Spending Review 2025: the impact for your business

Following on the March 2025 Spring Statement, on 11 June 2025 the Chancellor, Rachel Reeves, announced the UK Spending Review.

This Spending Review sets the departmental budgets for day‑to‑day spending until 2028‑29, and until 2029‑30 for capital investment. The Chancellor was quoted as saying that this Spending Review ‘sets out the government’s plans to invest in Britain’s renewal: its security, health and economy’.

But were there any announcements that could affect your UK small business?

Key announcements from Spending Review 2025

Unlike the Spring Statement, there were no direct business announcements in the Spending Review. But investment in defence, health, infrastructure projects and technology may well have an indirect impact on the future prosperity of your small business.

Let’s look at the most important announcements:

1. Increased spending on defence:

Defence spending will rise to 2.6% of GDP from 2027, with an ambition to reach 3% in the next Parliament, when economic and fiscal conditions allow.

For businesses and contractors in the defence sector, this renewed investment may well lead to new contracts and a more stable pipeline of defence projects and revenue.

2. More investment in health and public service infrastructure

Spending Review 2025 announced a £2.3 billion real terms increase (£4 billion cash increase) in the Department of Health and Social Care’s (DHSC’s) annual capital budgets from 2023‑24 to 2029‑30. These funds will be used to invest in the National Health Service (NHS).

This will include investment in new technology, hospitals and primary care. For businesses that provide technology and equipment to the NHS, this is an opportunity to increase investment in your niche. Building contractors will also benefit from capital assigned to building new hospitals.

Around £2.4 billion per year will be invested in the School Rebuilding Programme over the next four years, reaffirming the government’s commitment to rebuild over 500 schools. Again, this is good news for the building and construction sectors.

3. A boost to capital investment

Substantial new capital investment has been promised by the Government, with the aim of promoting growth across the whole of the UK. This boost to investment could be good news for contractors providing services to the public sector, including those in transport, energy, construction, and research and development.

The government is providing:

• £15.6 billion in total by 2031‑32 through the new Transport for City Regions (TCR) settlements to give metro mayors of some of England’s largest city regions long‑term transport settlements.
• £39 billion for a new 10‑year Affordable Homes Programme.
• £14.2 billion for Sizewell C over the SR period, the first state‑backed nuclear power station since 1988.
• £22.6 billion per year for research and development by 2029‑30, in support of the government’s forthcoming modern Industrial Strategy.

4. Deeper investment in digital technology and AI

The Spending Review announced investment in digital and artificial intelligence (AI) across many public services, including in the NHS.

The Government is providing funding directly to departments to build strong digital and technology foundations, modernise public service delivery, and drive a major overhaul in government productivity and efficiency

5. More funding to transform HMRC into a digital-first service

The Government will invest a further £500 million in His Majesty’s Revenue & Customs (HMRC’s) digital services over this SR period to make HMRC a truly digital-first organisation.

By 2029-30, a minimum of 90% of customer interactions will be digital self-serve, up from around 70% in 2025. This is likely to reduce your company’s direct interactions with HMRC staff, and drive more of your tax submission to the expanding Making Tax Digital platform.Talk to us about about investment opportunities for your business

With investment being ploughed into defence, health, infrastructure and technology, this is a good time to expand your public sector contracts and investigate the opportunities to support this capital investment in the future of the UK.