The Spring Statement: What did it mean for businesses?

A boost for the construction sector, but a challenging economic outlook

Restructuring Advisory Partner David Hudson and Financial Advisory Partner Matt Whitchurch share their key outtakes from the Spring Statement

As far as businesses are concerned, this was a Spring Statement that was light on developments.

For all of the speculation that the Chancellor would have to unveil some more ‘tough decisions’, the Autumn Budget this was not. There were no tax rises, and no rabbit-from-a-hat policy moments – a reflection of the government’s commitment to holding one fiscal event a year.

Growth on the horizon

The Chancellor took to the despatch box against a very challenging and volatile macroeconomic and political backdrop; a thread that ran through her speech, and that was spotlighted in the economic forecasts of the Office for Budget Responsibility (OBR).

Global headwinds have prompted the OBR to halve its growth projections for the UK economy this year – from 2% to 1%. And inflation is set to stay higher than previously thought, rising at an average rate of 3.2% this year, up from a previously anticipated 2.6%, although falling back towards the 2% target from 2026 and reaching it in 2027.

For businesses, this suggests that there won’t be immediate relief from the operational pressures they’ve been shouldering.

While economic growth is set to accelerate in every remaining year of this parliament, and overall be higher than the last forecast in October, it will remain below 2% for the duration of this period.

And stronger near-term inflation is likely to keep consumer confidence and business spending depressed. It could also prompt smaller, or more infrequent, rate cuts from the Bank of England over the coming months, which in turn would maintain the pressure on businesses seeking or servicing debt, while maintaining caution from both buyers and sellers when it comes to M&A activity.

As far as businesses are concerned, this was a Spring Statement that was light on developments.

For all of the speculation that the Chancellor would have to unveil some more ‘tough decisions’, the Autumn Budget this was not. There were no tax rises, and no rabbit-from-a-hat policy moments – a reflection of the government’s commitment to holding one fiscal event a year.

Building back better

Despite this, there was a seam of good news for the construction sector.

The government announced its intention to increase capital spending by an additional £13 billion by 2029-30, £4.65 billion of which would be committed to housing and infrastructure projects. And it re-announced further funding to help plug skills gaps, with £625 million in England to provide up to 60,000 new construction workers.

This came as the OBR forecast that changes to the National Planning Policy Framework (NPPF) alone – announced in the Autumn – would push housebuilding levels to a 40-year high.

The government’s intention with its capital spending announcement was, in its own words, to give providers confidence to invest in development pipelines ahead of the Spending Review in June. This, which is the next big economic set piece we’ll see from the Chancellor, will bring the publication of a long-awaited 10-year infrastructure strategy along with more detail on capital expenditure plans.

But setting confidence aside, there’s a question of whether the support it’s offering to help address blockers to progress is enough. The Federation of Master Builders was quick to point out after the Spring Statement that the 60,000 new construction workers the government aims to train through its new skills funding fall far short of the extra 250,000 that will be necessary by 2028 to meet existing levels of demand.

By looking ahead, anticipating challenges and seeking help as it’s required, Britain’s businesses will be well positioned not just to survive in these shifting conditions, but to thrive in them.

David Hudson Partner Restructuring Advisory

The coming months

For everyone else, it’s pretty much ‘as you were’.

On the one hand, management teams will have welcomed the Statement’s relative quiet as good news – chop and change brings uncertainty and disruption.

But it also means no relief for the many tax-raising measures that were unveiled in the Autumn Budget, several of which are now just days away from coming into effect.  

From the 1^st of April, the National Living Wage, paid to over-21s, will rise by 6.7%, while the National Minimum Wage for 18-20-year-olds will increase by 16%. Meanwhile, from the 6^th of April, employers’ National Insurance Contributions (NICs) will rise to 15%, while the earnings threshold for paying these NICs will fall from £9,100 to £5,000.

Together, these will put significant pressure on many businesses’ overheads, particularly those firms have a higher proportion of lower-paid workers, such as in the hospitality and retail sectors.

Steps for resilience

Against this background, management teams’ focus must be on preparation.

Businesses must be prepared to take proactive action to capitalise on new opportunities or weather any further deterioration in trading conditions. And, if they’re considering M&A activity, they will need to be prepared with a quality strategy – something that’s becoming increasingly important as a factor in successful deal completion, in a landscape defined by caution.

The world is indeed changing, as the Chancellor ended her speech observing. By looking ahead, anticipating challenges and seeking help as it’s required, Britain’s businesses will be well positioned not just to survive in these shifting conditions, but to thrive in them.