The Chancellor, Rachel Reeves, has delivered her first Spring Statement, outlining the government’s plans to balance the books and boost economic growth for the UK’s sluggish economy.
The announcements came in face of the news that the Office for Budget Responsibility (OBR) has halved the UK’s growth forecast for 2025, from 2% to 1%. Despite this, the budget deficit has been forecast to move from £36.1 billion in 2025-26 to an expected surplus of 6 billion by 2027-28 and £9.9 billion by 2029-30.
Businesses and consumers were also warned to brace themselves for a short period of rising inflation, predicted to hit 3.2% next year, before falling to the target of 2% from 2027.
Below, we summarise the key updates for businesses.
Certainty for innovative businesses
No changes for R&D Tax Credits, Capital Allowances or Corporate Tax
There were no changes announced for the R&D Tax Credits or Capital Allowances schemes or for Corporate Tax, helping to give businesses a welcome level of certainty around their investment plans after what has been a difficult few months for many industries.
A new consultation for R&D tax relief advance clearances
HMRC have launched a consultation on widening the use of advance clearances for R&D tax relief claims, aimed at reducing fraud, providing more certainty for businesses and improving customer experience.
The consultation is expected to run until 26 May 2025. We look forward to collaborating with the government on this and will provide our response in due course.
Other highlights from the Spring Statement
Extra investment for infrastructure to boost private investment
The government has promised an extra £13 billion in capital investment, on top of the original £100 billion announced in the Autumn Budget. This investment will be focused on stimulating private investment to boost growth for infrastructure, housing, and defence innovation.
Boost for defence spending and innovation
The Chancellor made several references to the dangers that have arisen as a result of a “changing world” and confirmed that defence spending would increase by an extra £6.4 billion by 2027 so that total defence spending rises to 2.5% of GDP to meet the threats facing our country.
The government is particularly keen to boost defence innovation with the launch of a new innovation body, UK Defence Innovation (UKDI) tasked with helping the UK adopt cutting-edge technologies, drive faster procurement and ensure that there are economic spillovers from the increased spending to help make the UK “a defence industrial superpower”.
There would also be a new push for modernisation, with 10% of the MOD’s equipment budget being focused on advanced equipment like uncrewed and autonomous systems (e.g. drones), dual-use tech and AI-enabled solutions.
A drive for government efficiency powered by technology
To help modernise public services and improve frontline delivery, a £3.25 billion Transformation Fund was announced to drive efficiencies through the use of digital technology, including £42 million for testing and deploying AI applications in the hope of making government more effective.
Further investment in HMRC
In the Autumn Statement there was a commitment to invest in HMRC to reduce errors and fraud in all areas of revenue collection and tax relief (including R&D Tax Credits and Capital Allowances).
As part of the Spring Statement, the government announced further anti-tax avoidance measures aimed at raising over £1 billion in tax revenue by 2029-2030 along with plans to modernise the digital tax system.
As part of this, HMRC aims to hire 500 more compliance staff, adding to the extra 5,000 that had previously been announced.
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