Market Insight
Spring Statement 2025
Background
Pre-budget media coverage has focused on the government’s ‘fiscal headroom’ – the leeway that Chancellor Rachel Reeves has to increase spending without breaching fiscal rules. Back in October the headroom was c.£10bn (quite low vs history), but rising government borrowing costs have wiped it out. As a result, the government had recently signalled cuts to spending, such as the £5bn welfare cut last week and a further £0.5bn only this morning. The situation is made all the more tricky by a 50% cut to the UK’s forecasted growth, stubbornly high debt-to-GDP ratios, and a complex geopolitical backdrop, which were all outlined at the beginning of the Chancellor’s speech. More positively, we learnt this morning that UK inflation fell to 2.8% in February, in a boost to the Chancellor.
Policy Highlights
Implications for individuals
- Taxation: Under Reeves’ promise to deliver only one fiscal event per year, taxes were left unchanged, but with promises to crack down on unpaid taxes.
- Property: Plans to streamline permissions and to build 1.3 million new homes over the next five years.
- Welfare: Expected cuts to welfare were announced, including the freezing of various universal credit payments, and stricter eligibility for both incapacity and personal independence payments.
Implications for businesses/national economy
- Public Services: The civil service will be further reduced. Defence spending will increase to meet the pledge of 2.5% of GDP by 2027, including an additional £2.2bn allocation for advanced military technologies and improved housing for armed forces families, funded from lower overseas aid.
- Businesses: No significant announcements, as businesses were seemingly left alone to deal with the 1.2% increase in National Insurance Contributions announced at the last budget (and due 6th April).
- Industries: Aside from defence and housing, the government reiterated its ambition to stimulate innovation and productivity in tech-related industries. A key goal is to create ‘Europe’s Silicon Valley’ between Oxford and Cambridge through infrastructure improvements and streamlined planning.
Investment Opportunities and Outlook
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Risk Warning
This article is provided for information purposes only. All material(s) have been obtained from sources believed to be reliable, but accuracy is not guaranteed. The views and opinions expressed are the views of Fundhouse and are subject to change based on market and other conditions. Fundhouse is the trading name of Fundhouse Bespoke Limited. Fundhouse provides investment management services to professional clients and does not provide financial advice. Importantly, this note does not represent investment advice, and any reader should always speak to their financial adviser before making any investment decisions. Please note that the value of any investment may go down as well as up, and you may lose capital when investing, and the value of your investments may not always increase. Please ensure that you are comfortable bearing financial losses and that you are comfortable taking a long-term investment view of five years or more.
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