Chancellor Rachel Reeves delivered a significant Spring Budget on March 26, 2025, announcing a comprehensive plan aimed at bolstering the UK economy amid ongoing global uncertainties. The budget outlines an additional £2 billion in capital spending each year, supplementing the £100 billion allocated during the Autumn Budget. This investment is designed to catalyze private investment, stimulate growth, and advance the UK’s modern industrial strategy, particularly by unlocking the potential of the Oxford-Cambridge Growth Corridor.
Much of the new funding will focus on defense, with plans to upgrade military family homes in Plymouth, Aldershot, and York, alongside significant modernization efforts at Portsmouth's naval base. The budget also earmarks an extra £4.65 billion for infrastructure and housing, primarily allocated for the later years of Parliament. Notably, an additional £2 billion for the 2026-27 fiscal year will be paid down in advance to avert a cliff edge in affordable housing funding.
According to the Chancellor, the government expects to raise approximately £645 million over three years from a new Building Safety Levy imposed on housing developers starting in October 2026. Reeves emphasized that the Office for Budget Responsibility (OBR) projects that the planning reforms included in the National Planning and Policy Framework will significantly increase housing development, with house building expected to reach a forty-year high of 305,000 homes annually by the end of the forecast period.
Reeves stated, "The OBR has concluded that our reforms will lead to house building reaching a forty-year high of 305,000 a year by the end of the forecast period," adding that changes to the National Planning Policy Framework alone would help build over 1.3 million homes across the UK in the next five years. This ambitious housing initiative aims to fulfill the government’s manifesto promise of constructing 1.5 million homes in England during this parliamentary term. The projected increase in housing is expected to boost real GDP by 0.2% by 2029-30, contributing an estimated £6.8 billion to the economy.
In her address, Reeves also highlighted the government's commitment to reforming the welfare system, which she described as a crucial step in supporting more individuals into secure work and alleviating poverty. The Chancellor noted, "This Labour government was elected to bring change to our country. I am proud of what we have delivered in just nine months. Now our task is to secure Britain's future in a world that is changing before our eyes." The reforms will include an increase in the Universal Credit allowance from £92 to £106 per week by 2029-30, although the health element of Universal Credit will be cut by 50% and new claims will be frozen.
Moreover, a stricter eligibility test for Personal Independence Payments (PIPs) will be implemented starting November 2026. The government plans to reduce its operational costs by 15% by the end of the decade, initiating this process with a voluntary exit scheme expected to cut around 10,000 civil service jobs.
On the defense front, the Chancellor confirmed that defense spending will rise to 2.5% of GDP, partially funded by reductions in overseas aid. By 2029-30, these changes are projected to save £2.6 billion in day-to-day spending. Reeves affirmed, "This additional investment is not just about increasing our national security but increasing our economic security, too." She also announced that at least 10% of the Ministry of Defence’s equipment budget will be allocated to novel technologies, including drones and AI-enabled systems, promoting advanced manufacturing in regions such as Glasgow, Derby, and Newport.
The government’s commitment to tackling tax evasion was also underscored, with plans to increase the number of fraudsters charged each year by 20%, which is expected to generate around £7.5 billion in revenue. Reeves remarked that these measures aim to avoid tax increases while enhancing public finances.
The OBR's latest forecast indicates that UK economic growth is expected to improve annually, with households projected to be £500 better off by the end of the forecast period. The Chancellor stated, "By the end of the forecast, our economy is larger compared to the OBR’s forecast at the time of the budget. This is about improving people’s lives." Despite the positive outlook, the OBR has revised this year’s growth forecast down to 1.0%, citing a £14 billion worsening in the current deficit, which could result in a deficit of £4.1 billion if no new measures are implemented.
Market reactions to Reeves’ Spring Statement have been mixed, with the FTSE 100 fluctuating as investors absorbed the details of the budget. Analysts noted that while the Chancellor aimed for stability, the lack of major surprises in her announcement left some investors feeling uncertain. Susannah Streeter, a market analyst, commented, "Reeves appeared to be on the losing side of investor sentiment with downgrades to growth this year, but scoring goals of optimism with upgrades to GDP further ahead."
As the government prepares to unveil further details on spending allocations across key Whitehall departments on June 11, 2025, uncertainty remains regarding potential winners and losers in various sectors. The upcoming spending review is expected to clarify how the budget will be distributed among critical areas, including housing and defense.
In the backdrop of these developments, the UK is grappling with broader economic challenges, including the lingering effects of the cost of living crisis that has impacted many households. Reeves’ budget aims to address these issues while laying the groundwork for future economic stability and growth.
As the Spring Statement concludes, the government’s focus on infrastructure, housing, and defense spending reflects a strategic pivot aimed at ensuring the UK remains resilient in a rapidly changing global landscape.
