Mohammad Jamei, CBI Director of Economic Policy, breaks down what the 2025 Spending Review means for UK business
This week, the UK Government delivered its first standalone Spending Review since at least as long as I've been here, setting departmental budgets that will shape the delivery of public services and national priorities over the coming years. While not a full fiscal event, this Spending Review sets the day-to-day spending and capital spending from financial year 2026/27 through to 2028/29.
What is a Spending Review - and why does it matter for business?
Unlike a Budget or Autumn Statement, a Spending Review focuses on how money will be allocated across government departments, rather than changes to tax or welfare policy. It is a critical signal of government priorities, and it lays the foundation for how long-term ambitions – like infrastructure delivery, R&D expansion, and net zero – will be funded.
This year's Review comes ahead of two major publications expected later this month: a 10-Year Infrastructure Strategy and a Modern Industrial Strategy. These are expected to offer more detail on how the newly allocated funding will be used.
CBI priorities: how did the Spending Review measure up?
In our submission to HM Treasury in February on the Spending Review, the CBI set out four goals by which business would judge success:
- Providing long-term certainty
- Driving efficiencies
- Delivering meaningful partnership
- Building on successes
We proposed both immediate interventions to support business confidence and long-term reforms to stimulate productivity and growth. On the whole, this Spending Review marks positive progress on many of these priorities, particularly in areas such as innovation, energy, and capital investment.
What we welcomed
Increased public investment in R&D
Government committed to £86bn in public R&D spending by 2029/30. While not fully meeting our ask to reach 3.4% of GDP in R&D intensity, this uplift reinforces the UK's ambition to lead in innovation-led growth. Every £1 of public R&D typically delivers £7 in long-term economic benefit.
Funding for the AI Opportunities Action Plan
We welcomed additional support to boost computing capacity, scale UK AI firms, and invest in AI skills will strengthen the UK's position in a global tech race. We also called for funding for regulators to ensure regulation keep pace with developments in this space, but what we saw this week is a welcome step.
Investment in net-zero transition
We called for clarity on Sizewell C, small modular reactors (SMRs), CCUS projects, and the Warm Homes Plan. The government delivered across the board:
- £14.2bn for Sizewell C
- £2.5bn for SMRs
- Continued support for CCUS projects
- £13.2bn to meet Warm Homes Plan commitments
Boost to the British Business Bank (BBB)
The BBB's financial capacity will increase to £25.6bn, surpassing the CBI's ask. This expansion will enable greater support for start-ups and scale-ups, in line with industrial strategy objectives.
HMRC reform and digitalisation
New funding will modernise HMRC's customer-facing services and streamline tax administration – both long-standing CBI priorities. This should save businesses time and reduce compliance burdens.
What was missing
Despite these gains, several key issues for business were noticeably absent from the announcements:
Industrial energy costs
UK firms still face energy prices significantly higher than international competitors – 50% more than in France or Germany, and four times more than in North America. We expect further detail in the Industrial Strategy due later this month.
Growth and Skills Levy
The Spending Review didn't provide clarity on delivery of the Growth and Skills Levy – critical for enabling firms to address skills gaps and boost productivity. We anticipate more information in the Autumn.
Tech adoption and Made Smarter expansion
We've long called for the Made Smarter programme to expand to all sectors. No new commitments were made, but further announcements are expected alongside the Technology Adoption Review.
What are members saying?
Given the nature of the Review – focused more on departmental allocations than direct business interventions – we are holding off on a snap member survey until the full suite of government strategies have been published, including the Infrastructure and Industrial Strategies.
If you're reading this and would like to share your feedback, please contact your account manager or send it to me directly.
CBI communications and resources
- Website article assessing the Spending Review: A more detailed assessment of what the Spending Review delivered across the CBI's four missions and what it delivered for the regions and Nations of the UK can be found here.
- Webinar for Members: On Monday 16 June at 10:00am I will be hosting a webinar to go through what the Spending Review means for your business. Register here.
- View Rain Newton-Smith's response to the Spending Review here.
- See our major wins highlighted on LinkedIn and on X.