BUDGET 2025: What about growth?

Growth… we hear a lot about it, but why does it matter?

Well, growth is a big goal for UK politicians because when the economy grows, the country normally benefits through:

• higher wages
• higher living standards
• better public services
• more job opportunities
• more consumer choice
• more affordable housing and essentials

Without growth, improvements in living standards tend to stall or even go backwards. Importantly, growth generates tax revenue without the need to raise taxes. If the economy is flat (it isn’t growing), any extra money for the NHS, schools, police, defence and anything else we value as a country, must be taken from somewhere else. That means painful cuts and difficult decisions.

How do you know if the country is “growing”?

Economic growth is an increase in the volume of goods and services produced in the UK economy, measured by the change in what’s known as the real Gross Domestic Product (real GDP).

Real GDP is basically the total value of everything we produce as a country.

Growth occurs when more people are in work, people earn higher wages (= more income tax for the government to spend), businesses generate more profit (= more corporation tax for the government to spend) and people spend more at the shops and on services (= more VAT for the government to spend).

So, what did this budget do to help growth?

Many people would say “not enough”, pointing to an absence of big, headline policies that could have stimulated the economy and kick-started growth.

But, the government has stated that growth is its “number one mission”. And it has made some definite nods towards this:

• The government committed to a significant rise in spending on things like infrastructure, transport, housing and public-works investment — which will hopefully boost economic activity both directly (through construction jobs, and demand for materials, for example) and indirectly (through improved transport, more housing, and better infrastructure).
• They promised to double down on planning reform to make it easier to tackle housing supply bottlenecks, get the country building, and get more young people into construction jobs.
• They also promised £100M to boost the UK’s AI sector

And on higher wages… the minimum wage was raised (coming into effect from April 2026), which is good news for workers and means more money in people’s pockets which the government hopes will be fed back into the economy as people spend it.

But, it’s not good news. Business owners may feel they have no choice but to pass on those minimum wage rise costs to customers, as they’re already facing higher costs, in part due to the increase in employer National Insurance contributions that was announced at the last Budget and rising energy bills, rising costs of raw materials and a rise in property costs. When businesses come under pressure, higher prices, slower hiring, and in the worst case scenario – job cuts – tend to follow.

So, what’s the verdict?

Some measures that would have directly targeted businesses, like a ‘windfall’ tax on the profits the banks make, which we thought might come in, ended up being abandoned in favour of ‘stealth’ tax rises through frozen tax thresholds. (That’s when the amounts you can earn without needing to pay Basic, Higher and Additional rates of income tax don’t move, so as our wages increase over time, more of us end up crossing tax thresholds that don’t move up with inflation). In this scenario, it’s individuals and households – not just employers – who will carry much of the cost.

For many households, this Budget will probably quietly show up as higher prices and more uncertainty, which isn’t good for consumer confidence and definitely isn’t good for growth. If we all batten down the hatches, and cut back on spending, the economy stutters and growth stalls. That’s bad for us all.