Spending Review 2025

An £86bn uplift to public R&D spending by 2029 / 30

Public R&D spending supports business innovation through funding, partnerships, and facilities; powers the UK's research base; and builds our pipeline of innovators. Every £1 of public R&D spending delivers £7 of long-term economic benefit. An uplift to this pot in challenging conditions sends a strong signal that the government is prioritising innovation-driven growth and is committed to ensuring the UK is a destination for business innovation.

Key R&D programmes boosted

Within the overall R&D budget, allocations for key programmes were made:

• The R&D Missions Accelerator Programme has been significantly expanded with £500m funding. This programme will be used to fund R&D for the government's Industrial Strategy priorities, and should provide significant opportunities for businesses to partner with researchers and innovators to tackle shared sector and national challenges
• The pilot regional Innovation Accelerator programme will be built on, with each of the seven Established Mayoral Strategic Authorities in England and each devolved nation receiving at least £30m to invest in building innovation clusters
• The Advanced Research and Invention Agency (ARIA) will receive an increase in its funding to deliver high-risk, high-reward innovation
• The defence R&D budget will increase every year across the Spending Review period, with the government prioritising innovation.

Businesses will have direct opportunities to obtain innovation funding, but the funding will also underpin the research they can build from, the pipeline of researchers and innovators they recruit from, and the innovation infrastructure they use to test and trial new technologies. Businesses will also be able to collaborate with academics, start-ups, and innovators to develop new ideas.

£2bn to deliver AI Opportunities Action Plan 'in full'

CBI members were positive about the AI Opportunities Action Plan but have been waiting to see significant progress on delivery. The £2bn funding boost is a welcome step, including funding to expand computer capacity, support UK AI firms to scale, and investment in AI skills. However, there is little detail on support for wider adoption across the economy with more detail expected in line with the Industrial Strategy and Tech Adoption Review due later this month.

Private investment in future industries

The government aims to crowd in private investment in key sectors including nuclear, CCUS, steel, and housing. This will help unlock growth and create jobs in high-potential industries.

Backing for housing and infrastructure

Support for Homes England, local authority housing, and land remediation is expected to feature in the ten-Year Infrastructure Plan - helping to accelerate housebuilding and regenerate underused land.

Funding mechanisms to drive growth

Mechanisms like the British Business Bank, Great British Energy, and the National Wealth Fund will be used to channel investment into strategic sectors – supporting innovation and long-term growth. With the British Business Bank's financial capacity increasing to £25.6bn, the Bank will be able to continue flagship programmes, such as Start-Up Loans and the Nations and Regions Investment Fund.

Confirmation of multi-year, integrated funding settlements for the North East, Liverpool City Region, West Yorkshire, South Yorkshire, and London to join West Midlands and Greater Manchester.

Across England, mayors are emerging as powerful engines of regional growth - attracting investment, unlocking business potential, and driving prosperity at home and abroad. To fully harness this potential, mayors need greater long-term certainty, empowering them to plan boldly and deliver lasting impact with confidence.

No reference was made to delivering much needed flexibility through the Growth and Skills Levy to ensure funds are better utilised for a wider range of training needs beyond recent announcements of Foundation Apprenticeships and Shorter Duration apprenticeships. These are urgently needed to enable businesses to effectively train their workforce and support economic growth. It is understood that further levy reform may appear as part of the Autumn Budget.

Accelerating technology adoption has extraordinary potential to drive productivity and growth. However, businesses face challenges in adopting new tech, including access to finance, infrastructure challenges, and skills. Positively, the Spending Review has trailed the establishment of an AI adoption fund. Looking ahead to the Industrial Strategy and Technology Adoption Review, businesses will value more information on this programme, and more broadly how the government can support businesses to accelerate their innovation journeys. To stay updated on this topic, members can join our new Technology Adoption Working Group.

The CBI will continue to campaign to unlock the levy to allow businesses to flexibly invest their contributions on both apprenticeship and non-apprenticeship training options.

Low-carbon power backed, with a major vote of confidence for nuclear power

Significant backing was given to the UK's nuclear industry with a record level £14.2bn funding for Sizewell C, £2.5bn to progress the UK's first Small Modular Reactor, and a further £2.5bn commitment to fusion technology. Great British Energy maintained its budget of £8.3bn to deliver clean power projects, despite rumours that it could be cut, including £300m already announced to support offshore wind supply chains over the next five years.

Commitment to decarbonise homes across the UK

Despite rumours of a reduction in spending, the government maintained its manifesto commitment to spend £13.2bn on the Warm Homes Plan over the next four years, in a boost for the low-carbon heating market. Funding will support the rollout of heat pumps, energy efficiency measures, and technologies like solar and batteries to millions of homes. More details of how this will be delivered are expected in October, including how additional funding will support the devolved nations.

Investment for carbon capture, utilisation, and storage (CCUS) projects, but the scope is unclear

Transitioning the North Sea and decarbonising industry was supported with £9.4bn investment in carbon capture storage. These include funding for the East Coast and HyNet Clusters. It is unclear whether funding will back a commitment to support development of the Acorn and Viking clusters. Funding timelines also remain unclear, with final investment decisions still due later this year.

Despite rumoured sector support, no allocations were given to address industrial energy costs, which remain among the highest in the world. This also means no further support for high-intensive industrial energy users through the Industrial Energy Transformation Fund.

While the Advanced Fuel Fund has been extended over the next five years to support the production of sustainable aviation fuel, allocations to deliver an expected revenue certainty mechanism – which would guarantee stable returns for suppliers – were not confirmed.

The CBI's priority is ensuring that energy costs do not undermine the UK's competitiveness, with lobbying focused on removing policy costs from industrial electricity bills. Please share how energy costs are affecting your organisation and contact your account manager to get involved in our policymaking.

The delivery of today's spending allocations will be determined by policy frameworks set out in key forthcoming strategies: the industrial decarbonisation strategy and renewables (AR7) auction round expected in July, and the Carbon Budget Delivery Plan expected in October. Please get in touch with your account manager to support our efforts to create a regulatory environment that maximises investment in the UK's energy transition.

Smarter regulation through AI

The government is investing in AI-enabled tools to reduce the cost of regulation, improve disease risk management, and streamline grant delivery. This will help businesses save time and money navigating complex regulatory processes.

Streamlined life sciences regulation

The upcoming Life Sciences Sector Plan will simplify clinical trials regulation and boost investment in genomics and cutting-edge technologies - strengthening the UK's global leadership and accelerating innovation.

Defence sector reforms to unlock delivery

The Defence Industrial Strategy will reform procurement and regulation, removing delivery barriers and launching Defence Growth Deals across the UK – supporting SMEs and supply chains in the defence ecosystem.

Click not call - unlocking a digital-first HMRC

The government confirmed £500m to make HMRC digital-first by 2029, with 90% of interactions self-serve, and £1.6bn to modernise IT and phase out outbound post – reducing manual processes and boosting responsiveness. This backs our call for HMRC to fix the basics before adding new reporting burdens.

Right first time – smarter support to strategically close the tax gap

HMRC's Departmental Efficiency Plan includes a focus on upstream compliance including in automation, case management tools, self-serve channels, and preventing non-compliance early. We urged HMRC to use its new compliance resource not just for enforcement, but to clear long-standing enquiries, improve access to technical advice, and support businesses in getting tax right, from the outset.

The plan also highlights that the merger of the Valuation Office Agency (VOA) into HMRC will result in 5-10% administrative cost savings for the agency – supported by the CBI to improve customer service, responsiveness, and transparency.

There was limited detail on how regulatory reform will be implemented across sectors beyond life sciences and defence. Businesses need a clear, cross-sector roadmap to reduce compliance burdens.

We'll have a clearer picture of how the ground lies when the Transformation Roadmap is unveiled later this summer. While the Spending Review settlement signals intent, it must now translate into tangible improvements in customer service. Businesses – large and small – will judge HMRC's strategy by whether it reduces delays, eases compliance burdens, and makes things easier for taxpayers to pay the correct tax.

The CBI's inaugural Business-Regulator Forum, taking place on 1 July, 10:00-12:00, in central London (venue TBD). The CBI will be joined by senior leaders from government, business, and UK regulators. Contact Alex Guest for more information.

The CBI will work closely with HMRC to ensure the Transformation Roadmap delivers real improvements for business – including digitalising paper forms, introducing a customer progress tracking tool, and improving audit trails in online tax accounts to cut reconciliation errors. These changes will be key to reducing admin burdens and ensuring the 2,400 new debt management officers avoid pursuing incorrect debts.

CBI Scotland welcomes the record £52bn settlement for Scotland announced in the Chancellor's Spending Review. We look forward to the forthcoming update from the Scottish Finance Secretary to the Scottish Parliament to outline the plans and details for how these funds will be allocated.

Backing innovation through investment in an Edinburgh-based supercomputer

The CBI had called for a renewed national commitment to R&D investment, urging the government to raise ambition and create the infrastructure needed to support global leadership in AI and scientific discovery. The UK government's £750m investment in a new national supercomputer at the University of Edinburgh delivers directly on this ask. It will enhance Scotland's world-class research base, unlock new opportunities in life sciences, climate tech, and data-driven industries, and help position the UK as a G7 leader in the R&D realm.

Hydrogen and carbon capture funding to progress key net zero projects in Scotland

In our Spending Review submission, the CBI highlighted the urgent need to progress industrial decarbonisation projects and called for a clear timetable and funding for carbon capture and hydrogen schemes. The Spending Review's confirmation of support for the Acorn Project (subject to final investment decision expected later in this Parliament) long championed by industry and the CBI, alongside investment in hydrogen production projects in Cromarty and Whitelee, is a welcome step forward. These commitments will enable critical emissions reductions, create high-quality, future-focused, green industry jobs across the north-east and central Scotland, and reinforce the UK's net zero credibility.

Strategic investment in Faslane supports economic growth and the UK's defence

CBI Scotland consistently champions investment in regional infrastructure that supports economic resilience and high-skill employment. The £250m committed to the redevelopment of HMNB Clyde (Faslane) aligns with our calls to deliver growth through place-based investment. This funding will strengthen Scotland's defence ecosystem and provides a welcome boost to local supply chains, skills, and economic opportunity. This announcement also complements the work of the CBI's Defence & Economic Growth Taskforce, a CEO-level initiative supported by the Chancellor and the Defence Secretary, designed to identify opportunities to drive UK productivity and regional growth through defence sector investment.

Place-based growth through Scottish Investment Zones, Green Freeports, and City and Growth Deals

The CBI's Spending Review submission highlighted the need to deliver on the Industrial Strategy's promise of place-based growth. The Spending Review's reaffirmation of four Investment Zones and Green Freeports in Scotland, including £160m for advanced manufacturing in Glasgow, and green industries in the north-east of Scotland aligns with our call for catalytic investment to boost regional economies, create jobs, and attract private capital. CBI Scotland has consistently championed targeted regional funding as essential levers for local economic development. The Spending Review's £452m funding commitment over four years to City and Growth Deals across all major Scottish regions supports our calls for place-based investment that empowers communities, attracts private capital, and drives job creation. This investment provides an opportunity to boost local infrastructure, innovation, and skills, ensuring every part of Scotland benefits from sustainable growth.

Apprenticeship Levy transparency of funding: CBI Scotland has long called for reform of the Apprenticeship Levy to provide more flexibility for employers and to support workforce development tailored to Scotland's needs. CBI Scotland would have welcomed greater transparency about what levels of funding the Scottish Government are set to receive specifically for the Apprenticeship Levy.

CBI Scotland Director, Michelle Ferguson will join the Secretary of State for Scotland and the Minister for Business from the Scottish Government for a roundtable on 12 June, and the Secretary of State for Scotland and the Chief Secretary to the Treasury on the 13 June, to discuss the Spending Review, its implications for Scotland's economy, and the key priorities from business across the country as CBI Scotland members.

CBI Scotland's wide range of Councils, Committees, Working Groups, and Events will carry on the discussion with our members to help shape our policy and response to the Spending Review.

• CBI People and Skills, Glasgow, 19 June 2025
• CBI Scotland Annual Dinner, Glasgow, 11 September 2025

Point of contact: Please contact CBI Scotland Director, Michelle Ferguson.

To join CBI Scotland: Please contact CBI Senior Associate Director, Mags Simpson.

£200m boost to capital investment

CBI Wales worked with other business organisations to make the case for an increase in capital funding for Wales which will employ more people and grow our economy and deliver badly needed infrastructure for some of Wales' largest companies. The Welsh Government will receive an additional £200m per year for capital investment, an issue the CBI has been pressing for some time. Working with the private sector such a sum can grow the economy and employ more people.

R&D boost will help drive clean energy investments

Wales is already delivering the clean, advanced industries the UK needs, with much needed hydrogen, semiconductors, renewables, and green steel. The Spending Review rightly backs that potential, with support for Port Talbot's transition, carbon capture, and R&D. UK-wide initiatives like the Net Zero Investment Accelerator and innovation funds offer real opportunities, especially for our thriving West Wales renewable energy cluster which, just one example, needs new wide roads to get the turbines to shore.

£2.4m to launch a new Brand Wales programme

This Spending Review provides £2.4m over 2026-27 to 2028-29 to launch a new Brand Wales programme, promoting Welsh investment opportunities and exports around the world.

Long-term budget setting to provide confidence

CBI Northern Ireland has long called for long-term budgets to be set (given the region has been working with ten-year budgets for nearly a decade now). Longer-term budgets will give confidence to local companies that work with government departments on procurement contracts - especially in sectors such as construction, IT, and health.

Support for clean energy

Assuming Northern Ireland receives a proportional share of any further funding for the energy transition, the government's support in this area will benefit local businesses and households. Recent research from the CBI's "Going for Green" report suggests that Northern Ireland could see an increase of up to 58,000 jobs in the green economy over the next ten years. This is part of a broader effort to unlock green growth potential, which could deliver a GDP boost of up to £1.7bn annually by 2030. Investing in green energy will secure energy supplies, drive growth, lower prices, and decarbonise the economy. However, we need to see the granular detail on the breakdown.

A growth fund in Northern Ireland of £46m

Along with any uplifts stemming from UK investment in affordable housing, connectivity, high street renewal, and schools investment, Northern Ireland will also receive £46m for local growth. The full detail is yet to be ironed out, but this will incorporate funding for Educational Underachievement in Northern Ireland (with an impact on the skills pipeline). Given Northern Ireland's lower levels of educational attainment, a deficit in skills and lower productivity, CBI members will be keen to see more investment in this area.