Business leaders have given a muted response to the Spring Statement, saying whilst it contained no surprises they remain concerned about overall business confidence.
Chancellor Rachel Reeves said she would bring about a “new era of security and national renewal” as she set out her plans for the UK economy.
She confirmed a £2.2 billion increase in the defence budget in 2025-26 and announced a £3.25 billion Transformation Fund to support the “fundamental reform of public services, seize the opportunities of digital technology and Artificial Intelligence (AI), and transform frontline delivery to release savings for taxpayers over the long-term”.
The Office for Budget Responsibility (OBR) downgraded predicted growth for this year from 2% to 1% but it upgraded estimated growth for the next four years, to 1.9% next year, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.
At the autumn Budget the Chancellor announced that the Welsh Government would be provided with a £21 billion settlement in 2025/26. That includes an additional £1.7 billion through the Barnett formula, with £1.5 billion for day-to-day spending and £250 million for capital investment.
The UK Government said the measures announced at the Spring Statement would top these Barnett consequentials up by a further £16 million in 2025/26. The Welsh Government continues to receive over 20% more per person than equivalent UK Government spending in the rest of the UK, translating into over £4 billion more in 2025-26, it said.
The Welsh Government’s block grant funding from 2026-27 onwards will be confirmed at Phase 2 of the Spending Review, which concludes on 11 June 2025. The Chief Secretary to the Treasury will meet with his counterparts from the devolved governments to discuss their priorities ahead of its conclusion, said the UK Government.
Secretary of State for Wales Jo Stevens said:
“The £16 million made available today through the Barnett formula adds to the £21 billion record settlement announced for the Welsh Government at last Autumn’s Budget, boosting spending on public services like the NHS which is already seeing waiting lists fall in Wales.
“We have made sure that no Welsh families will pay even a penny more tax in their pay packets and boosted the minimum wage and living wage for up to 150,000 workers in Wales.
“We are creating tens of thousands of new jobs through our Welsh Investment Zones, Freeports and through local growth projects and inward investment. Today’s investment in defence will also boost the industry in Wales. And we have delivered a better deal for Welsh steelworkers and, for the first time, £25 million to keep Welsh coal tips safe.”
Gus Williams, interim CEO at Chambers Wales South East, South West and Mid, said:
“As expected, there was not much in terms of new announcements in the Chancellor’s Spring Statement today. The OBR forecasts highlight economic concerns already familiar to most businesses in Wales. Inflation concerns have not yet disappeared and there are worries about business and consumer confidence.
“Infrastructure and housing falls within the remit of the Welsh Government and like the rest of the UK, Welsh businesses support the prioritisation of simplifying the planning system but are keen to see the proof of this with spades in the ground. The industrial strategy and increased defence spending we hope will have a positive impact in Wales where the manufacturing and defence industries have a significant presence. Infrastructure investments are proven to boost economic investment and channelling more spending out of the civil service and directly into infrastructure and increasing the amount of funding available to Wales is also welcome, providing the right projects are chosen.
“It is difficult to see any significant improvement in confidence and investment driving economic growth without capital investment led by the Government. The Government remains bound by fiscal rules that I would argue ignore the economic impact of borrowing to fund capital investments. Part of the problem has been the lack of any robust return on investment analysis on government spending.
“Consumer confidence remains hamstrung by a two-tier economy. The success of healthcare, welfare, and employment reforms will hang on whether they manage to improve overall employment and wage growth; this will be a big test over the next 12 months. The Government has been clear that this is how it expects to be judged in the long term.
“Business owners are facing significant headwinds, the full impact of which we are yet to see. The economy could break out of these headwinds but the Government will need to lead the way – just cutting spending will not change much, reform needs to achieve change.
“Global trade remains the government’s other major challenge. At the moment the Government is trying to balance its relationship with the US and EU and whether events will force them off the fence one way or another remains to be seen. With domestic demand static, growth may be dependent on how the global trade environment now evolves.”
Lloyd Powell, head of ACCA Cymru/Wales, said:
“ACCA’s data from SME financial professionals highlighted plummeting business confidence in recent months, largely driven by increasing costs. Today’s statement didn’t contain any additional measures that will impact upon business, but this year's lower growth forecast, cost increases and the knock-on impact on inflation will do little to boost confidence and investment.”
Speaking on behalf of ICAEW in Wales, Director Robert Lloyd Griffiths said:
“The good news is that there were no big or nasty surprises in the Chancellor’s Spring Statement today. That’s important because businesses are already having to get ready for next week’s increases to employer’s national insurance contributions and the National Living Wage.
“Alan Vallance, our Chief Executive at ICAEW, wrote to the Chancellor ahead of the Spring Statement saying that we need a smarter approach to investment, which focuses on unlocking private funds and prioritises spending on skills, technology, and infrastructure. That is what our members believe is critical to support business growth so, the Chancellor is right, it is time to step-up, act swiftly and become more agile. However, as with everything in life, actions speak louder than words. We need to know how today’s headlines around investment in defence and housebuilding will benefit Wales. Let’s hope that the eagerly awaited publication of the modern industrial strategy will give us the reassurance that we need.
“As always, our members stand ready to support governments in both Westminster and Cardiff Bay, particularly given that any decisions taken today will set the direction of travel for years to come and certainly supersede the Welsh elections next year.”
Rain Newton-Smith, CEO of the CBI, said:
“Weaker growth this year is a serious setback but not a surprise given the burden businesses are shouldering after the Budget.
“The Chancellor has kept her promise to business, made at our conference, not to raise the burden further, and focus on the efficient delivery of public services.
“It is the right approach that the Government asks of the public sector the same as it has been expecting of business since the Budget – to absorb costs through agility, modernisation and innovation.
“Firms are already braced for a difficult few months ahead with NICs, and National Living Wage increases next week. In its current form, the Employment Rights Bill risks imposing a significant regulatory burden onto companies with damaging consequences for growth, jobs and investment. A landing-zone that commands the confidence of businesses and workers can still be found by taking the time to build a consensus that will give these reforms the footing to have a positive lasting legacy.
“Protecting public capital spending is the right move to create the foundations for future growth but the Government cannot deliver growth alone. Only the private sector can provide investment at the pace and scale we need to boost productivity, create jobs and improve living standards.
“The Government must use the Spending Review to double down on unlocking investment to secure the more positive outlook for long-term growth. Setting a world-leading goal for R&D investment, giving employers the flexibility to choose the training and qualifications that make sense for their workforce, and improved public private partnerships to fund better homes, better schools and better transport would all help deliver growth.”
UKHospitality said that the lack of a clear growth plan for hospitality puts high street jobs at risk. It called for the UK Government to urgently bring forward a plan that allows hospitality to unlock growth and jobs for “everyone, everywhere”.
Kate Nicholls, Chief Executive of UKHospitality, said:
“Growth won’t just happen without a plan. Today’s statement was yet another missed opportunity to avoid an April cliff edge which will level a devastating £3.4 billion annual increase to the sector’s tax bill.
“The Government’s own analysis shows the failure to address the employer NICs threshold will force businesses to freeze recruitment, reduce hours available for staff and reduce employment levels in the very sectors the Government needs to achieve its goal to get people off welfare.
“If the Government is serious about getting Britain working, it needs hospitality. When we were backed after the financial crash and the pandemic, we proved how we can help drive economic recovery.
“Our new research this week proves that hospitality and the foundation economy are essential to the Government’s plan to create jobs where they’re needed, not just in clusters in the South East.
“There is still time for the Chancellor to act and avert this disaster. Now is the time to back hospitality, delay the changes to employer NICs and work with us to bring forward a plan for the high street that can deliver socially productive growth and opportunities to get people back into work.”
The National Centre for Universities and Business (NCUB) said that with the Office for Budget Responsibility reducing the growth predictions from 2% to 1% for this year, it was “imperative that the Government prioritises economic growth”.
While longer-term projections have increased slightly, the UK Government must continue to invest in R&D and innovation, creating the ecosystem needed for growth, it said.
NCUB CEO Dr Joe Marshall said:
“It was reassuring that the Chancellor acknowledged a major UK strength is our position as a ‘hub for global innovation’. This shouldn’t be taken for granted and is the result of a strong and effective supporting ecosystem.
“While efficiency savings in government should always be sought, and the transformation fund is a welcome initiative, it will be important to ensure that these changes are carried forward without negative impact on the research and innovation ecosystem.
“The Chancellor has today stressed the increasing importance of defence spending in an uncertain world. It must be remembered that research and innovation is as crucial for defence supply chains as it is to other sectors of the economy.”
The Chancellor also announced that the UK Government will remove Climate Change Levy costs from electricity used to produce green hydrogen.
RenewableUK’s Director of Future Electricity Systems Barnaby Wharton said:
“We're delighted to see this reform, which will help to reduce the cost of green hydrogen for businesses and billpayers. Our Splitting the Difference report released in January highlighted the case for exempting electricity used to make green hydrogen from the Climate Change Levy as part of a package of measures to cut green hydrogen production costs by 58%, so we welcome today’s announcement by the Chancellor that she will take forward this key recommendation.
“Green hydrogen generated in high-tech electrolysers using renewable electricity has an important role to play in decarbonising sectors like steel, chemicals and shipping, which are hard to electrify. It can add vital flexibility to our energy system, as it can be stored and used whenever it's needed, providing long-duration energy storage which helps to balance and strengthen our energy system by making the best use of the vast quantities of electricity we’re now generating from renewables”.
“Other measures are also needed to speed up the roll-out of this innovative technology, such as removing barriers to enable green hydrogen producers to co-locate their projects alongside renewable energy generators which already have planning consent to cut costs and reduce delays. We also need to see an ambitious strategy to develop a hydrogen transmission network, with pipelines linking Scotland to England and Wales to optimise the availability of green hydrogen.”
