One year in: taking stock of the government’s growth mission

Setting the tone: stability, investment, and reform

The government's early days were marked by optimism. The Prime Minister declared that the "work of change begins - immediately," and the Chancellor swiftly laid out her three-pillar growth approach. "Stability" came through firm commitments to fiscal rules and pledges not to increase National Insurance, income taxes, or VAT. "Investment" focused on mobilising private capital via initiatives like the National Wealth Fund, guided by recommendations from Mark Carney. "Reform" targeted long-standing barriers, including a proposed overhaul of the National Planning Policy Framework to restore mandatory housing targets. These early priorities signalled a genuine intent to create a pro-growth environment, and businesses took note. The UK Composite Purchasing Managers' Index (PMI) climbed to 52.8 in July 2024, reflecting expanding private sector output. The CBI's Industrial Trends Survey showed a modest rise in output expectations among manufacturers, underlining a business community hopeful for policy-driven growth.

A shift in mood: fiscal realities bite

By the autumn, optimism had begun to wane. An HMT-led fiscal review over the summer uncovered a £22bn 'black hole', and the Prime Minister warned the public that things were to get worse before they got better.

There followed a decline in business confidence as expectations of a difficult Budget to come began to grip. The PMI fell from 53.4 in August to 51.8 in October, its lowest point in 11 months. The CBI's Service Sector Survey highlighted how the services sector was struggling with cost pressures and policy uncertainty leading up to the Autumn Budget.

Confirming expectations, the Chancellor delivered a difficult Budget on 30 October, ushering in £40bn of tax rises - the largest tax increase since 1993. Businesses were hit hard, with the Chancellor looking to changes to Employers' National Insurance Contributions and reforms to Business Property Relief and Agricultural Property Relief to fill the blackhole. Unsurprisingly, the PMI dipped into contraction territory in November (49.9), and the CBI's Distributive Trades Survey showed declining retail sales and waning confidence among wholesalers.

New year, new positivity

Attempting to reset the narrative, the Chancellor began 2025 with a positive, growth-oriented narrative. In a speech delivered at Siemens Healthineers in Oxfordshire, she announced major infrastructure plans, including developing the Oxford-Cambridge Growth Corridor, expanding Heathrow, and a new Planning and Infrastructure Bill. While these proposals were welcomed by business and seen as long overdue, inflationary pressures, rising bond yields (peaking at 4.87% in January), and shrinking fiscal headroom signalled more turbulence ahead. In March, the Office for Budget Responsibility downgraded growth forecasts and projected a fiscal shortfall of £4.1bn by FY29/30. The Chancellor's Spring Statement on 26 March, intended to be non-eventful, turned into a de facto fiscal event. She introduced measures to cut day-to-day spending by 15%, tightened welfare eligibility, and channeled new funding into defence, affordable housing, and skills training, including £625mn to upskill 60,000 construction workers. The plans returned the expected fiscal surplus in FY29/30 to £9.9bn - the same figure set after the Autumn Budget. March's PMI showed modest recovery at 52.0, driven by service sector growth. The CBI's Growth Indicator reinforced this trend, with stronger output expectations, though firms remained wary of high input costs.

Navigating global headwinds

In April, international developments tested the government's resilience. Donald Trump's "Liberation Day" speech unveiled tariffs on UK goods, including 25% on steel, aluminium, and automotive products, prompting immediate concern across industry.

The challenge presented was stark, as evidenced by CBI Economics research with the West Midlands Combined Authority. Nearly half of businesses surveyed planned to review profit margins; 24% expected to reduce output by year-end; and 30% of firms planned to scale back investment - rising to 35% in manufacturing - due to the tariffs.

Mitigating these impacts, the government responded decisively. It secured a trade deal with the US (ratified as the Economic Prosperity Deal later in June) that saw a reduction in automotive tariffs and aerospace product exemptions. The government also sought to form closer relations with the EU, with the Prime Minister hailing that "Britain is back on the world stage" following the UK-EU Summit in May. The PMI, which had fallen to 48.5 in April amid tariff uncertainty, rebounded to 52.0 in June following the deal and other trade progress, including a strengthened EU relationship and an FTA with India.

Long-term thinking

With international progress the focus in May, domestic issues returned to the fore in June, which can best be described as the government's strategy month.

First up was the Spending Review on 11 June which revealed how the government planned to distribute the overall spending envelope set at the Spring Statement. As expected, there were winners and losers, with the MoD (3.8%), DBT (3.0%), DHSC (2.7%), and DESNZ (2.7%) seeing real terms increases in their total budgets (resource and capital) for the FY25/26 and FY28/29 period. The story was less positive for the FCDO (-8.3%) and DEFRA (-2.3%) who were the notable departments receiving real term cuts. The budgets were accompanied by significant capital investment, including £86bn for public R&D investment up to FY29/30 and £14.2bn for Sizewell C.

Three growth strategies then followed in quick succession, presenting the government's long-term thinking on how it planned to deliver on its Growth Mission:

• UK Infrastructure: A Ten-Year Strategy came on 18 June - pledging £725bn in public investment, introducing a digital infrastructure pipeline portal, and embracing public-private partnerships.

• The UK's Modern Industrial Strategy then followed on 23 June - prioritising eight high-growth sectors, offering some flexibility in the Growth and Skills Levy, and aiming to lower industrial electricity costs.
• The UK's Trade Strategy rounded things off on 26 June - committing to explore broader trade tools beyond FTAs and pledging an additional £20bn for UK Export Finance.

Whilst welcomed in isolation, CBI members surveyed were less convinced when asked whether the strategies represented a coherent economic strategy - 55% backing coherence, 45% against the statement.

Where next?

The government's long-term vision - as laid out in its trio of growth strategies - provides a strong directional signal but now must be underpinned by tangible short-term delivery. Businesses need to see credible, timely policies that ease cost pressures and incentivise investment today, not just tomorrow. The CBI's latest economic forecast reflects a picture of businesses muddling through, hampered by cost burdens, weak demand, and uncertainty. As the Autumn Budget approaches, the government faces tough decisions. To realise its ambition of the highest sustained growth in the G7, it must pair strategic intent with productivity-enhancing, business-focused action, starting now.

The growth mission - one year in

It's been an eventful 12 months for the government as it has sought to deliver its growth mission. Domestic and international uncertainties will likely continue to weigh heavily on the economic outlook.