Budget 2025: mixed industry reaction to £26bn tax raising Budget

On investment commitments Katy Dowding, Skanska UK president and CEO, said: “It was great to see the chancellor lead with her commitment to infrastructure investment and delivery. We have worked closely with the Treasury because infrastructure is the backbone of Britain’s economic growth and so I welcome today’s continued commitment to invest in not only projects but skills.

“Decisions made today carry both immediate and long-term consequences. Our sector is agile to change, we plan for it, and we await the detail that follows the chancellor’s speech. However, these measures can only be judged a success if investment is truly unlocked, political commitments are upheld, and pipeline guarantees are delivered.

“Now is the moment to turn words into action and lay the foundations for Britain’s future economic growth. We understand that industry needs to step up in terms of productivity, and that will be further enhanced by having pipeline certainty. Construction is the catalyst for this vision, we are ready to build, and so are our people.”

Andrew Reynolds, RLB UK & Europe chief executive, said:  “Productivity is the nation’s challenge, and ONS data shows the construction sector is finally making the biggest upward contributions to year-on-year growth in output per hour worked. The chancellor’s announcement today of £ 820m over three years for “youth guarantee” will be particularly welcome in our sector, particularly the promise for every 18-21 year old in England access to apprenticeship, training and education or job opportunities.

“It was also good to hear the £13bn funding to devolved governments and tax breaks for high street retail and leisure, which will help the urban regeneration needed in so many of our towns. However, the biggest absence from this budget was any significant new announcements on PPP, which, although off the balance sheet, surely is needed to fund the future of our estates within the regions.

“Yes, we’ve had the announcement on Neighbourhood Healthcare Centres, which although part of the chancellor’s narrative today, was announced in July. But nothing further. We could do with more comprehensive announcements on TIF (Tax Incremental Financing) and RAB (Regulated Asset Base) models.”

Ben Goodwin, CECA director of policy & public affairs, said: “Contractors will welcome the message in this Budget that infrastructure investment is central to the UK’s growth strategy.

“We are particularly pleased to see that Government has listened to industry, and decided not to go ahead with converging rates of Landfill Tax - a proposed reform that would have severely hamstrung the ability of CECA members to deliver projects cost-effectively.”

Referring to the London commerical market, Shabab Qadar, Partner, London Offices Research at Knight Frank, said: “For central London offices, the impact is twofold. Occupiers in finance and professional services will take encouragement from efforts to revive the UK’s capital markets, but rising employment and living costs could temper expansion plans elsewhere in the economy. The combination of higher operating costs and limited movement on planning or infrastructure means decision-making is likely to remain cautious as firms look ahead to 2026.

“Investors, meanwhile, will welcome clarity on the fiscal framework but may adopt a more selective stance as pricing adjusts to a tighter macro environment. Prime, ESG-aligned buildings will continue to command interest, but the absence of meaningful support for sustainable refurbishment leaves secondary assets with an unnecessarily uphill path to repositioning.

“Overall, this was a Budget that steadied the ship but did not set a new course. London’s market will adapt - it always has - but today’s measures mean the sails may fill more slowly before the wind picks up again.”

Speaking about the impact on trades,CEO and Co-founder of On The Tools, Lee Wilcox, said: “As the UK’s largest construction community, we hear from trades on site every day. This Budget is asking them to shoulder more risk at the very moment they need stability the most. Higher wage bills, increased National Insurance, and frozen tax thresholds all squeeze the brickies, sparkies and plumbers who already run on wafer‑thin margins, and many will feel they are being taxed for simply keeping Britain’s infrastructure standing.

There are, however, some important green shoots, particularly the £13bn of flexible funding going to seven mayors across England. If those pots are used to back housing, retrofit, regeneration and local infrastructure, it could mean more work.

Another area of optimism is the £820m youth guarantee and the wider focus on skills and apprenticeships. If that money genuinely reaches small firms and sole traders, not just the big players, it could finally help rebuild the talent pipeline and bring thousands of young people into sustainable careers in the trades.

Simon Williams, head of national markets at BNP Paribas Real Estate, said: “For the UK investment market, the fundamental drivers remain unchanged. Interest rates and economic uncertainty are the primary roadblocks to widespread liquidity. While we are seeing a discernible return of investor confidence, transactions remain constrained by the gap between buyer and seller expectations, which is anchored by the high cost of capital. Fortunately, the near-term path for interest rates is becoming clearer. We are increasingly confident that we will see two more rate cuts over the next six months, which will lift investor sentiment and help bring down debt costs.

“Moreover, the higher-than-expected projected fiscal headroom is positive for rates markets and will go some way to reassuring investors that volatility will remain subdued. Indeed, the fact that the markets’ reaction to the Budget’s tweaks has been muted thus far is positive. Overall, we think there is reason to be cautiously optimistic that liquidity will improve gradually from here, and we should see an increase in capital held on the sidelines deployed in H1 2026.”

Alan Sinclair, UK managing director of energy and natural resources, Turner & Townsend, said: “Energy security and affordability were high on the chancellor’s agenda today as Reeves’ Budget sought to tackle costs for British families and manufacturers. The North Sea Future Plan, published separately, demonstrates a commitment to driving this and delivering a fair transition towards clean energy.

“As the government has made clear throughout this year, nuclear will be an important part of the nation’s future energy mix. Though Labour’s response to the recent Nuclear Regulatory Taskforce report has been pushed back, it was promising to hear that it will be setting out plans for regulatory change for the sector in the coming months.

“However, while slashing red tape will help to speed up getting spades in the ground, government and industry must also work together to build capacity as a host of energy projects jostle for resource. There’s a risk here of a crunch moment in the next couple of years as these programmes come online – the sooner industry can prepare, the better.”

Budget at a glance

• Freeze on income tax and national insurance thresholds extended for three years from 2028
• Legal minimum wage to rise in April by 4.1% for over 21s and by 8.5% for 18 to 20-year-olds
• Plans to converge two rates of landfill tax halted
• £13bn funding for seven regional mayoralties
• “Mansion tax” of between £2,500 and £7,500 for properties valued over £2m.
• Recommitment of £900m for Lower Thames Crossing
• Funding for regional infrastructure projects including £20m Peterborough sports quarter
• OBR upgrades growth forecast from 1% to 1.5% but downgrades productivity
• Fiscal headroom doubled to £22bn
• Recommendations to cut red tape in nuclear sector to be delivered within three months