Spring Statement 2025: What It Means for Small Businesses
The government has unveiled its Spring Statement, outlining spending cuts and investment in infrastructure aimed at boosting economic growth for the remainder of Labour’s term in office.
We have summarised the key takeaways from Chancellor Rachel Reeves’ speech that are most relevant to small businesses and the self-employed.
Key Announcements from the Spring Statement
OBR Growth Forecasts
The Office for Budget Responsibility (OBR) has revised its growth forecast for this year down to 1 per cent, a reduction from the previously projected 2 per cent in the last Budget.
However, in response to Reeves’ planned changes, the OBR has upgraded growth projections for future years: 1.9 per cent in 2026, 1.8 per cent in 2027, 1.7 per cent in 2028, and 1.8 per cent in 2029.
The OBR also reported that the average household is expected to be £500 better off annually under Labour’s government.
Welfare Cuts and Employment Support
The government has already announced £5 billion in welfare cuts, driven by changes in how disability benefits such as Personal Independence Payments (PIP) are assessed. This could significantly affect the estimated 600,000 self-employed people with disabilities in the UK.
In response, Reeves pledged to invest £1 billion in personalised employment support to help individuals re-enter the workforce.
Strengthening Tax Collection
The Chancellor intends to raise an additional £1 billion by enhancing HMRC’s tax collection efforts. This includes increased investment in cracking down on tax avoidance, with a target of boosting enforcement efforts by 20 per cent.
Boosting Housebuilding and Construction Skills
Reeves also announced a £2 billion allocation for affordable housing in the next financial year. The government anticipates housebuilding will reach a 40-year high, with 305,000 homes constructed annually, totalling 1.3 million over the next five years.
To address the skills shortage in the trades, the government is setting aside £600 million to train the next generation of construction workers, including the establishment of new technical excellence colleges.
Inflation and Interest Rates
Inflation is set to rise more quickly than expected, with the OBR predicting an average rate of 3.2 per cent this year, before falling to 2.1 per cent in 2026.
Higher inflation typically leads to increased energy costs, wages, and the price of goods and services, adding pressure on businesses facing rising operational costs.
On 20 March, the Bank of England announced it would keep interest rates at 4.5 per cent following a cut in February.
Lack of Relief for Small Businesses
Several policy changes from the Autumn Budget 2024 are set to impact small businesses from April, including higher employer National Insurance contributions and an increase in the national living wage.
The Spring Statement did not deliver the relief many small business owners had hoped for, prompting criticism from opposition parties. “Business confidence has been smashed in a million pieces,” one opposition spokesperson said.
A recent Simply Business survey found that 24 per cent of small business owners want the government to reverse the National Insurance increase, while 27 per cent are calling for a simplified tax process. Many business owners fear they may have to close due to mounting costs.
“Today’s Spring Statement will have disappointed the small business owners who tuned in with hope for support,” said Julie Fisher, UK CEO at Simply Business.
“Instead, they face the harsh reality of tax hikes set to take effect next week. In response, around half (43 per cent) of small businesses will be forced to raise their prices. Even more worrying are the one in five (18 per cent) SMEs fearing that they will cease trading within a year if economic conditions don’t improve – that would mean almost one million fewer businesses in the UK. The impact that these changes will have on our local communities and economy cannot be overstated.
“The Chancellor has made it clear that employment is central to delivering the UK’s much-needed growth, so the announced £600 million funding into the construction industry will be a welcome investment for firms across the country. This highlights the deep well of opportunity that lies within small businesses, with SMEs representing over half of employment in the private sector. However, in light of the imminent increasing tax burden, a quarter (24 per cent) of SMEs will cancel hiring plans.
“If we’re to tap into the employment opportunities that the small business sector can provide, we must listen to and fulfil the needs of SMEs. What’s good for small businesses is good for our economy. SMEs have consistently demonstrated that they can grow and innovate when given the right conditions. As it stands, these conditions are simply not in place.”
What is the Spring Statement?
While the government has committed to holding only one major fiscal event per year – with the next Budget scheduled for the autumn – the Spring Statement provides an economic and fiscal update. This includes forecasts from the Office for Budget Responsibility (OBR) and a statement to Parliament from Chancellor Rachel Reeves.