Chancellor Announces 2025 Autumn Budget – with Industry Comment

THE CHANCELLOR of the Exchequer Rachel Reeves said she had made the “right choice for a fairer, stronger and more secure Britain” as she delivered her Autumn Budget today.

The Chancellor said that the Office for Budget Responsibility (OBR) expects the UK economy to grow by 1.5% this year, upgraded from its forecast of 1% in March 2025, while forecasts for subsequent year’s growth were downgraded to 1.4% in 2026, 1.5% for 2027-2030.

She said inflation is predicted to average 3.5% this year, before falling to 2.5% in 2026 and 2% in 2027.

For devolved governments there will be an additional £820m for the Scottish government, £505m to the Welsh government and £370m to the Northern Ireland executive.

Tax Changes

In her speech the Chancellor confirmed National Insurance thresholds and income tax will remain frozen at their current level until 2031. This will mean that by 2031, tax thresholds will have been frozen for nearly a decade since it was first instigated by former Conservative Chancellor Rishi Sunak in 2021.

“Permanently lower tax rates” will be introduced for more than 750,000 retail, hospitality and leisure properties which the Chancellor says will be funded through higher rates on properties worth £500,000 or more, such as warehouses used by online retail giants.

Tax on profits made by gambling firms from online betting are set to rise from 21% to 40% in April. Meanwhile, bingo tax will be abolished.

National Minimum Wage

The legal minimum wage for over 21s will see a 4.1% rise in April 2026, from £12.21 to £12.71 per hour. Meanwhile, wages for 18 to 20-year-olds will rise 8.5% from £10 to £10.85 per hour.

Tax & Savings

The cash ISA savings allowance for under 65s has been capped at £12,000 a year, with the rest of the £20,000 annual allowance reserved for investments.

Basic and higher income tax rates on property, savings and dividend income to increase by 2%.

A new tax exemption for small packages worth under £135 from overseas retailers will be introduced from 2029, after complaints it hinders UK businesses.

Electric Vehicles Tax

A new excise duty on electric cars, payable alongside vehicle excise duty, at 3p a mile for electric cars and 1.5p for plug-in hybrids.

‘Mansion Tax’

Properties in England worth more than £2m will pay a council tax surcharge of between £2,500-£7,500, for homes in bands F, G and H.

Pensions

Under the ‘triple lock’, basic and new state pensions will increase by 4.8% from April 2026 – more than the current rate of inflation of 3.5% (itself forecast to reduce to 2.5% in 2026, then 2% in 2027).

The Chancellor also announced people paying into their pension pot under salary sacrifice schemes must start paying NI on contributions over £2,000 a year from 2029.

Skills & Training Funding

From August 2026, government will fully fund apprenticeships for non-levy paying employers (mainly SMEs) for eligible people aged 16-24.

As previously announced, short training courses will be introduced from April 2026.

Known as apprenticeship units and designed to give businesses flexibility to develop the skills they need, the first wave of apprenticeship units will be in areas such as artificial intelligence, digital and engineering.

Other key measures include an £820 million investment in a new “youth guarantee” which promises every 18 to 21-year-old in England access to an apprenticeship, training, or education opportunities or to help find a job.

Infrastructure

Local roads funding increasing to over £2 billion annually by 2029-2030 for local authorities to spend on roads.

The Chancellor also confirmed the DLR extension to Thamesmead and the Lower Thames Crossing with a further £891 million ahead of private sector construction.

Other measures already announced include a default ‘yes’ for developments around train stations, starting three New Towns this Parliament, and Small Modular Reactors at Wylfa on Anglesey.

Government’s commitment to build 1.5 million homes was supported by funding hundreds more planners across England and lower business rates tax rates for 750,000 retail and hospitality properties.

Energy

The energy company obligation (ECO) scheme is to be scrapped, expecting it to reduce bills by £150 a year. The Chancellor said it costs £1.7bn a year overall, and has cost families in fuel poverty more than it has saved.

INDUSTRY REACTION

Creating More Issues Than it Solves

Dr David Crosthwaite, Head of Consultancy, BCIS

Dr David Crosthwaite, chief economist at BCIS, said: “There’s little in this Budget for the construction sector.

“Plus points include £900 million additional capital for the Lower Thames Crossing scheme, free training for under-25 apprentices for SMEs, and steadfastness on Spending Review investments in infrastructure and housing.

“Yet the Chancellor’s celebration of the government’s planning overhaul to ‘get Britain building’ seemed misplaced. Construction output and housebuilding data tell another story – one of slow demand and a shrinking workforce.

“The Chancellor called private investment the lifeblood of economic growth. But as we found out first from the OBR’s leak, the threshold for employer National Insurance contributions (NICs) will freeze from 2028-29 and NICs will be charged on salary-sacrificed pension contributions.

“Will this government ever learn from the unintended consequences of its policies?

“Increasing the cost of doing business is likely to be inflationary. Higher costs will inevitably be passed on, placing further upward pressure on tender prices and reducing firms’ ability to hire. This could pile on more friction at a time when construction activity is already fragile.

“The above-inflation rise in the minimum wage for young people is also not as shiny as it sounds. It assumes that economic conditions are conducive for businesses to increase recruitment. That’s not currently the case, as evidenced by the high unemployment rate.

“For construction, already faced with chronic labour gaps and rocky investor confidence, this Budget might create more issues than it solves.

Disappointed

Ian Rippin CEO MCS

Ian Rippin, CEO at MCS, comments, “MCS is disappointed by the Government’s decision to end the Energy Company Obligation (ECO4) in today’s Budget, which will create substantial challenges for businesses, hinder sector growth, and adversely affect some of the most vulnerable households in the country. Government incentives have played an important role in increasing access to home-grown energy for households across the UK, including under ECO4. With ECO4 now set to end on 31 March 2026 and the Warm Homes Plan not yet published, this … is likely to create substantial challenges for businesses, hinder sector growth, and adversely affect households that would rely on the scheme.

“While we await clarity over the Warm Homes Plan, MCS hopes to see a robust, fully funded offer to ensure that every household that was eligible under ECO4 can continue to access low-carbon energy and that confidence in home-grown energy continues to increase. ECO4 put financial responsibility for the installation of clean heat mechanisms on energy suppliers as a measure to support those in need to be able to access low-carbon technologies and reduce their bills. It is these households who will ultimately lose out. However, the cuts announced today won’t just impact households, it will impact industry growth and countless businesses across the country, including the MCS certified installers delivering installations under ECO4.

“There have been around 20,000 certified solar PV and 10,000 certified heat pump installations under ECO4 since February 2025 alone, showing that the grant has supported wider market adoption of low-carbon technologies as intended. Nearly 400 MCS certified installers are delivering work under ECO4 and will be greatly worried by today’s announcement and the impact it will have on their business.

“While parts of the industry are left with significant uncertainty after today’s Budget, MCS is pleased that the Boiler Upgrade Scheme (BUS) has not been impacted, despite unhelpful speculation in recent weeks that risked undermining the confidence in home-grown energy that MCS and the wider industry have long been building. Greater certainty over the BUS, which we hope to see more of in the upcoming Warm Homes Plan, will be welcomed.”

Helping Young People Thrive

Andy Rayner, Director of Skills and Apprenticeships at Travis Perkins

Andy Rayner, Director of Skills and Apprenticeships from Travis Perkins Plc said: “Today’s announcements are very welcome news for anyone starting out in the trades. The expansion of the youth guarantee, alongside fully funded apprenticeship training for under 25s working in SMEs, will remove real barriers for young people who want to learn practical skills and build a long term career.

“For construction, this is significant. Our industry needs more people coming through and these measures will make it easier for both learners and employers to commit to apprenticeship routes.

“At Travis Perkins we see every day how high-quality training helps young people thrive. This investment will help bring more talent into the sector and give thousands a real opportunity to build a future in the trades.”

Long Way to Go

Terry Woodley, MD of Development Finance at Shawbrook,

Terry Woodley, MD of Development Finance at Shawbrook, commented: “The road to 1.5m new homes has been paved with good intentions, but there’s still a long way to go if the target is to be met within the next five years. The lack of announcements at the Budget was the elephant in the room,

especially following the recent news from the Housing Secretary that developments near train stations will receive a default yes, and the Chancellor’s recent appointment of an infrastructure and planning adviser.

“Wider industry issues such as the training of additional planners, planning red tape, and a lack of support for first time buyers have all contributed to waning activity levels this year, leaving developers feeling apprehensive about what 2026 will bring. If the Government wants to truly embody its ‘build, baby, build’ call to arms, then prioritising a similar scheme to Help to Buy and enhancing infrastructure capabilities will need to be top of the list.”

Budget Makes Housebuilding Harder

Sean Keyes, CEO, Sutcliffe, said: “I would ask how we will hit the 1.5m home targets that will ultimately improve health, education and financial inequalities in the UK?  For those in the construction sector this is a major pillar of our future.”

“The Chancellor speaks of growth and stability, businesses are left wondering how we’re meant to deliver it when employment costs have just been substantially increased. The last budget saw a 1.2% rise in employer National Insurance, combined with a £4,100 drop in the threshold and a 6.7% increase in the National Living Wage, represents a significant hit to labour-intensive sectors like construction – precisely the industries expected to deliver the government’s ambitious housing and infrastructure targets.

“Make no mistake, these costs don’t simply disappear into company accounts. After 40 years in this business, I can tell you exactly what happens: firms will have to make difficult choices about recruitment, pay rises will be constrained, and some projects will need repricing. For a construction company employing hundreds of people, we’re all looking at substantial additional costs at a time when we’re being asked to scale up delivery, not scale back.

“You cannot simultaneously increase the cost of employment whilst calling for economic growth – something has to give. The infrastructure investment announced is welcome, but it needs businesses with the capacity and financial headroom to deliver it. This Budget makes that harder, not easier.”

Sombre Mood on Housebuilding

Richard Cook, Senior Economics Director at Pegasus Group

Richard Cook, Senior Economics Director at Pegasus Group, said: “Against a backdrop of low growth and economic challenges, today’s Budget was a critical opportunity to turn the tide and set out a new agenda of positivity. While continued funding commitments to support regional transport infrastructure and local regeneration projects are welcome, the fact remains that the construction sector – and housebuilding in particular – are still not set up to succeed.

“The Government’s ambitious housebuilding targets that it set last year are now looking increasingly unlikely, with data from last week showing a 6% decline in new additional dwellings. Add to this low productivity growth, a tough graduate jobs market, labour shortages in construction and planning, and now today’s headline tax rises which will naturally have ripple effects onto the housebuilding sector, it is hardly surprising that a sombre economic mood persists in the sector.

“While there are positives to be taken from today’s devolution funding commitments, alongside recent US investment in technology infrastructure and the Oxford-Cambridge growth corridor, more needs to be done to attract external investment, or else construction and development will remain stagnant.

“The Planning and Infrastructure Bill is almost set to receive Royal Assent, which should offer a boost to the planning process and open the door to increased investment. But at this stage, its actual impact is still purely hypothetical, and it has hardly been accompanied by sufficient supporting measures announced today.

“Skills shortages still persist as the acute problem hampering the success of construction and development, and it seems unlikely that today’s measures will make a dent. In fact, the increase in minimum wage, far from bringing additional recruits into the sector, may well limit the hiring ability of contractors in the face of the wider milieu of financial pressures.

“If the Government is to pick up the pace and meet its ambitious housing and development targets, additional action is urgently needed. While the steady stream of Budget leaks made clear that no resolution was immediately going to present itself, we need to start seeing results rather than just empty promises.”

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