The Autumn Budget 2025: What it Means for the UK Economy

In late November, the UK Government’s Autumn Budget was delivered against a challenging economic backdrop, marked by an ageing population, subdued productivity and rising pressure on public finances. 

With around 34 million people in work supporting a growing number of retirees and benefit claimants, the Chancellor has faced difficult trade-offs between stability, spending and growth.

In our December 2025 Economic Update, economist and strategist Roger Martin-Fagg shares his perspective on what the Budget could mean for people and businesses across the UK.

This article will summarise the key points of the report. But for a deeper dive from Roger, you can download the full Economic Update here. 

Fiscal reassurance

The Budget contains a number of measures intended to provide stability and longer-term support.

A central aim appears to have been to reassure financial markets, supported by the creation of a large contingency fund. 

Spending continues to be concentrated on welfare, pensions and health, reflecting demographic pressures such as an ageing population.

The government has retained its long-term infrastructure ambitions, with major projects remaining on the official pipeline, although delivery has been uneven. The commitment provides a degree of certainty for businesses planning future investment.

Targeted skills measures are to be implemented, with full funding available for certain apprentices aged 16–24, particularly those with additional needs or care experience.

Despite economic challenges, the OECD and IMF continue to forecast that the UK will be among the stronger performers in the G7, with growth broadly in line with other advanced economies.

The cost to growth and productivity

Concerns remain around growth and productivity, with private and public investment spending remaining below pre-financial crisis levels. Uncertainty ahead of the Budget may have also further weakened investment and hiring.

There’s scepticism about whether the Budget offers a clear long-term growth strategy, with much of the additional spending absorbed by welfare, pensions, health and debt interest rather than investment.

Freezing income tax allowances raises revenue, but is expected to draw more people into higher tax bands (4.8m over the next four years) and limit growth in disposable incomes. The burden, therefore, falls disproportionately on working people and savers, rather than being more broadly spread.

Debt remains high, and borrowing costs are expected to stay under pressure amid rising global bond yields.

The overall picture

Overall, Roger says, the Budget prioritises financial stability and support for vulnerable groups, but leaves longer-term questions around growth, productivity and living standards unresolved.

Its impact is likely to be felt unevenly, offering reassurance to markets and increased public spending, but limited immediate relief for households and businesses facing higher tax pressures.

Download the Economic Update for December 2025 in full.

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