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12 December 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

Close call on a Christmas cut

  • The EY ITEM Club expects the Bank of England to cut Bank Rate to 3.75% at its December meeting. 
  • However, it will likely be another close call, with a slim 5-4 majority expected in favour of a rate cut. Next week’s inflation data could prove the final hurdle and may still sway the decision in either direction.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “November’s decision to keep Bank Rate unchanged was a finely balanced vote of 5-4 in favour, reflecting two different opinions amongst Committee members. These divisions will likely remain at the December meeting, but this time, the EY ITEM Club expects a finely balanced vote in favour of another cut, with inflation likely having fallen back in the last few months.” 

Growth concerns versus inflation stickiness.

“For those Monetary Policy Committee (MPC) members that favoured a November cut, concerns over the growth outlook had increased and they were more relaxed about inflation risks. Meanwhile, for those who preferred to keep rates on hold, worries about inflation stickiness carried greater weight. The data developments since the last meeting are unlikely to have moved the needle for the core members of either camp. However, Governor Bailey, who is likely to cast the decisive vote, made remarks in the November meeting indicating that further signs of disinflation would be sufficient for him to vote for another cut. The recent fall in inflation will likely be enough to meet this threshold.. However, a substantial upside surprise in the inflation data published the day before the December meeting could still knock a Christmas cut off course.” 

No expectations of longer-term commitment 

“The MPC made clear at its November meeting that it still thought interest rates will be lowered further, with the disagreement focussed on the timing and extent of cuts. With activity and the labour market looking weak, this messaging seems likely to be retained. However, any promises on the timing of the next cut appear unlikely. Instead, the MPC will probably show a degree of caution as it waits to see how the crucial early year pay settlement season plays out. Pay growth has slowed relatively sharply in the last few months, but the Bank of England’s recent survey of key corporate decision makers indicates 2026 pay settlements may still be above the rates consistent with inflation returning to the 2% target.” 

12 December 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

Successive monthly falls in GDP highlight underlying weakness

  • October's 0.1% month-on-month fall in GDP compounded September's drop, as a modest rebound in manufacturing output combined with broad-based weakness in the services sector. GDP should recover in the latter months of 2025 as manufacturing output continues to normalise after September's temporary slump. But private demand remains modest.
  • GDP growth is set to remain in a low gear in 2026. Slowing real income growth, tightening fiscal policy, and some households still refinancing their mortgages onto higher interest rates will all weigh on the domestic economy.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “GDP fell by 0.1% month-on-month in October, marking a second month of falling activity with output having declined by 0.1% in September, too. October's fall was driven by the services sector, where output fell by 0.3%, with business-to-business and consumer-facing services both reporting reduced activity. There was a modest recovery in manufacturing output, as a major motor manufacturer restarted production after a cyber-attack in September. The manufacturing recovery is likely to have continued over the remainder of 2025, as motor vehicle production returned to normal levels. 

“GDP fell by 0.1% across the three months to October, and there may even be a quarter-on-quarter drop in output in Q4 as a whole. Growth has been notably slower than in the first half of the year, when the UK was one of the fastest growing advanced economies. But the monthly GDP series is noisy and prone to revision, while residual seasonality likely exaggerates strength at the start of the year and overstates weakness in the latter half. Nonetheless, the signs are that momentum is weak, with the expenditure data in Q3 showing little growth in private demand. 

“Today's data strengthens the likelihood that growth will remain at a slow ebb moving into 2026 as the combination of tightening fiscal policy, weakening real income growth and a large minority of households refinancing mortgages to higher rates weighs on the economy.”

04 December 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

Budget concerns overstate weakness in the construction sector

  • November’s construction Purchasing Managers’ Index (PMI) points to a notable contraction for the sector. However, the survey’s pessimism appears overstated and largely reflects business uncertainty around the Autumn Budget, which hadn’t been announced at the time of the survey. With the eventual Budget tax rises at the lower end of expectations, a rebound in the PMI seems likely next month.
  • Nonetheless, the construction sector’s outlook is mixed. Government investment and planning reforms will offer some support, but continued uncertainty around the domestic and international economy could see some large projects either cancelled or delayed.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “November’s construction PMI fell sharply to 39.4, down from 44.1 in October. November’s reading was the weakest since the onset of the pandemic and activity was reported to have contracted in all major sub-sectors. Construction businesses pointed to fragile market confidence hampering demand with the Autumn Budget, which was announced after the survey was conducted, providing a significant source of uncertainty for the sector.

“November’s extremely weak PMI should be approached with a healthy degree of scepticism. Throughout most of the year, the PMI has been much more pessimistic than official estimates of construction sector activity, and in November, this negativity looks to have been magnified by expectations of tax rises at the Autumn Budget. Even before November’s significant fall, a flagging construction PMI has consistently remained in contractionary territory across 2025. But between January and September, the Office for National Statistics (ONS) estimated that construction sector output grew in six of the nine months, leaving activity more than 1% higher than at the end of last year. With the tax rises announced at the Budget towards the lower end of expectations, a significant rebound in the PMI next month seems likely, even if it remains below the 50 no change mark.

“However, with that said, the Autumn Budget didn’t seem to move the needle significantly for the construction sector and its outlook remains mixed. Public infrastructure projects and planning reforms will provide the sector with some support, but continued uncertainty around the UK’s economic outlook will see some private sector construction projects postponed or cancelled, while the availability of skilled labour and April’s confirmed 4.1% rise in the National Living Wage will likely continue to affect the viability of some construction developments.”

03 December 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

PMI points to a steady but subdued economy

  • Pre-Budget uncertainty likely weighed on business sentiment and affected November's UK Purchasing Managers’ Index (PMI). Growth will likely struggle to pick up given that fiscal policy is tightening, real income growth is weak, and some households still must refinance mortgages onto higher interest rates.
  • The S&P Global survey suggested that inflationary pressures are receding. The EY ITEM Club continues to expect a December rate cut over the Bank of England waiting until the February meeting, but it’s likely to be a very close call.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “The final S&P Global composite PMI pointed to a slowing economy in November, recording 51.2, down from 52.2 in October. The services sector drove the fall, with the PMI declining to 51.3 in November, down from 52.3 in October. The survey was conducted before the Autumn Budget and concerns around possible tax rises weighed on business sentiment. Respondents also cited a gloomy global economic outlook as a factor that weighed on new business. 

“There was another large revision to the flash reading, adding to questions about the credibility of the early release. The services PMI has also often been a misleading indicator of activity in the sector as it tends to be overly sensitive to business sentiment. With the Autumn Budget's tax rises at the lower end of expectations, an uptick in the December PMI can’t be ruled out, but there is good reason to think that the economy will find it difficult to gain momentum in the near-term. Fiscal policy will continue to tighten, real income growth will continue to slow, and some mortgages still need to be refinanced onto higher interest rates.

“Easing cost and price pressures along with a deteriorating growth outlook are paving the way for an interest rate cut before the Christmas break. Although interest rates were kept unchanged at the Bank of England's November meeting, the decision was finely balanced, and it was clear that a majority of the committee anticipated having to reduce interest rates further. They'll take confidence from respondents to the S&P Global survey reporting the weakest rise in prices in nearly five years, reinforcing the signal from the recent falls in inflation and pay growth. On balance, a rate cut at the December meeting appears slightly more likely than the Bank of England waiting until February, but it is expected to be a close call.”

02 December 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

Housing market continues to tick along

  • Nationwide’s house price gauge pointed to continued but modest growth in November. The housing market now looks to have stabilised, with the distortions of April’s Stamp Duty change fading. The council tax surcharge announced at the Autumn Budget appears unlikely to have a significant impact on the housing market.
  • There doesn’t look to be much more space for mortgage rates to fall in the near-term and with significant improvements in housing affordability seemingly a thing of the past, a material increase in housing market demand looks unlikely. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “According to Nationwide estimates, house prices continued to rise at a modest pace in November, increasing by 0.3% on the back of a 0.2% pick up in October. Annual house price growth softened a little, slipping to 1.8% in November, down from 2.4% in October as last year’s unusually strong November reading dropped out of the calculation.

“The distortion from April’s stamp duty change has faded and housing demand has picked back up after some transactions were brought forward to beat the deadline. Mortgage lending and approvals recovered over the summer and have stabilised above the levels seen in the last couple of years. Changes to property taxes announced in the Autumn Budget are unlikely to have an immediate or material impact on the housing market. The high value council tax surcharge will not come into effect until April 2028 and will impact less than 1% of properties in England. 

“There appears to be little scope for the housing market to improve meaningfully from here and modest performance is expected over 2026. Even though the Bank of England left interest rates unchanged at its November meeting, financial markets continue to expect further interest rate cuts, so there is limited scope for new lending rates to fall in the near-term. While housing affordability has improved over the last couple of years, it remains stretched, and softer pay growth going forward means that the significant improvements in housing affordability are likely now behind us.” 

01 December 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

 Mortgage market firms up after Stamp Duty change

  • UK mortgage activity has stabilised at higher levels than those seen before stamp duty distortions took effect. However, a further increase in activity is unlikely, with little room for mortgage rates to fall and improvements in affordability in the rear-view mirror. 
  • Consumer credit slowed again in October as repayments increased. Consumer demand and the outlook for credit are modest given slowing real income growth, tighter fiscal policy, and the prospect of higher mortgage rates for some households. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Mortgage approvals were 65,018 in October, down slightly from 65,647 in September. However, activity in the mortgage market is running at levels above those seen before stamp duty distortions kicked in. Although net secured lending slowed to £4.3bn in October, falling from £5.2bn in September, lending flows are also well above the average of the past couple of years. 

“Although the Bank of England kept Bank Rate unchanged at its November meeting, financial markets continue to expect further interest rate cuts, but two and five-year swap rates are little changed over the month, so there isn't much room for a fall in quoted mortgage rates in the near-term. Meanwhile, slowing pay growth means that the gains in housing affordability are now in the rear-view mirror. As a result, housing market and mortgage activity are likely to stabilise at current levels rather than continuing to rise. 

“Net unsecured lending slowed for the second consecutive month, falling to £1.1bn in October, down from £1.4bn in September. Consumer spending and credit demand are both expected to remain modest as real income growth slows, fiscal policy tightens, and some households refinance mortgages onto higher interest rates. 

“The softness is matched in the manufacturing sector. Though today's S&P Global manufacturing Purchasing Managers’ Index (PMI) recorded 50.2, up from 49.7 in October, this was barely in expansionary territory. While the PMI is a relatively unreliable predictor of month-to-month moves in the sector's performance, weak demand in both domestic and overseas markets continue to prove a challenge for manufacturers.”

26 November 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

Fiscal credibility will be hard won - EY ITEM Club comments

  • Tax rises announced in the Budget have put the UK’s public finances on a more sustainable footing. Revisions to the OBR’s forecast did not leave the Chancellor facing the fiscal hole that was widely anticipated. But she decided to bank the good news and increase the wiggle room left against the Government’s fiscal rules.
  • Nonetheless, some risks remain. The UK’s tax and spending plans are now based on more plausible looking growth forecasts. But the impact of a patchwork of small tax rises is more uncertain and carries a greater risk that revenue expectations are disappointed. While headroom remains a little slimmer than historical standards.
  • Today’s announcements will do little to change the UK’s near-term growth outlook.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “The Labour Government’s second Budget has set out a plan to keep the UK’s public’s finances on a more sustainable footing. By increasing the headroom against its primary fiscal target to £22bn, the Government’s strategy has become less vulnerable to the day-to-day moves in the economy and financial markets, while its tax and spending plans are based on OBR growth forecasts which now look more plausible. Following a period of over-optimism around the UK’s productivity prospects, the OBR has downgraded its long-term GDP growth forecast to 1.5%, which is much closer to our expectation.

“However, fiscal credibility will remain hard won. Although the Chancellor faced a much smaller fiscal hole than many anticipated, she still opted to raise tax revenues. Freezes to income tax thresholds combined with a patchwork of multiple small tax rises have helped to build back some fiscal headroom, but that is not without some risk. A little under half of the new revenue comes from these smaller tax changes and is much harder to accurately estimate than the effect of more sweeping changes to measures like income tax would have been. Therefore, the Autumn Budget carries some possibility that eventual revenues may disappoint the OBR’s expectations.

“While the fiscal situation now looks more stable, this Budget might not be the end of the story. The Chancellor has increased her fiscal headroom to a little below previous averages, but a level of uncertainty lingers around the impact of some of the Budget’s tax rises, which is exacerbated by the recent volatility of the UK and global economies. The OBR estimates that there is a 59% chance that the Government’s primary fiscal rule will be met.

“Today’s announcements will do little to change the UK’s near-term growth outlook. The additional tax revenue raised in this Budget will build slowly over the next five years.  Additional welfare spending will come online more quickly, but the small increase in borrowing compared to the Spring Statement is unlikely to have a significant impact on the growth outlook for 2026 or 2027.” 

21 November 2025 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

Pre-Budget concerns weigh on the PMI

  • Pre-Budget concerns have contributed to a downbeat UK Purchasing Managers’ Index (PMI), so November's fall should be taken with a pinch of salt. Nonetheless, the outlook remains modest with tighter fiscal policy, weak real income growth, and some mortgages still to be re-fixed at a higher interest rate all headwinds to growth. 
  • A weak growth outlook combined with a deteriorating jobs market and falling inflationary pressures keep a December interest rate cut on track. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Taken at face value, the fall in November's PMI to 50.5, down from 52.2 in October, points to a stalling economy. The loss of momentum was most evident in the services sector, where the PMI slipped to 50.5 in November, down from 52.3 last month. Respondents to the survey reported that pre-Budget uncertainty amongst customers had seen some spending decisions postponed, causing a drop off in incoming business. 

“However, the PMIs should be taken with a pinch of salt. In recent times, the PMIs have been sensitive to business sentiment rather than true changes in activity, while the flash estimate has been prone to significant revisions. While some of the weakness in this month's reading is almost certainly down to business concerns around tax rises at the Budget, private sector momentum is modest at best, and it is expected to continue that way over the next few quarters. Consumers and businesses will still have to overcome tighter fiscal policy, weak real income growth, and some mortgages being refinanced to higher interest rates.  

“A weak growth outlook combined with easing price pressures are increasing the likelihood of a pre-Christmas rate cut. The S&P Global survey reported the weakest reading for output price inflation for nearly five years. At its November meeting, a finely balanced Monetary Policy Committee (MPC) swayed towards keeping interest rates on hold. However, signs of easing inflationary pressures, a loosening labour market and a subdued growth outlook all point towards a rate cut in December.”

27 Nov 2025 | EY comments - Autumn Budget 2025

Budget 2025: EY comments on electric vehicles following the Autumn Budget

Maria Bengtsson, EY UK&I Mobility Leader, comments on electric vehicles following the Chancellor’s Autumn Budget: “While it’s positive that the rate of tax per mile for EV drivers will remain significantly lower than the effective rate for petrol and diesel drivers, this still represents a new additional cost for EV owners, and therefore a potential barrier to demand. That said, the additional £1.3bn of funding towards the Electric Car Grant should help offset some of the downside impact, making the EV transition more affordable for more households.

“The announcement of £200m in further funding towards the rollout of EV chargers across the country, as well as a 100% business relief rate for businesses with EV charging points are also encouraging steps to support the UK’s EV transition. The threshold for the expensive car supplement rising to £50,000 for electric vehicles, up from £40,000, may also make EVs more attractive to buy.

“Further announcements in relation to the automotive sector included a delay to the expected changes to employee car ownership schemes. These changes will now be implemented in 2030, with a two-year transition period. Details are still to be confirmed, but this delay will be positive news for many auto manufacturers and dealers who often use these schemes to help support demand for ‘nearly new’ used cars.”   

Media contacts:

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

27 Nov 2025 | EY comments - Autumn Budget 2025

Mike Grayton, EY Partner comments on the impact of the Budget on the Consumer Products and Life Sciences sector:

Consumer Products:

“Changes to the Soft Drinks Industry Levy may increase reformulation costs for some in the sector which could lead to price increases for consumers already facing higher costs and reduced spending power. The proposed tiered business rates system will benefit smaller businesses, although high-value properties will be more adversely impacted which could lead to pricing pressure. One area of optimism is the reference to increased R&D funding in coming years, and the potential for increased support for energy costs for manufacturing activities.”

Life Sciences sector:

“Support for advanced assurance on small and medium-sized R&D claims, along with previously announced initiatives under the Industrial Strategy, including the Life Sciences Innovative Manufacturing Fund, and the Global Talent Visa programme will be welcome news to the life sciences sector, however, many businesses will have been hoping for more. Rising costs from business rates on high value properties and increased employment expenses will increase costs and some in the sector will have been hoping more targeted measures to support companies.”    

Media contacts:

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Budget 2025: EY comments on Business Rate Multipliers following the Autumn Budget

Russell Gardner, EY UK Head of Real Estate, Hospitality and Construction, comments on Business Rate Multipliers: “The Budget included a series of adjustments that will affect the real estate market to varying degrees. Commitments to increase planning officer recruitment should help to accelerate decisions at a local level and move projects from concept to construction more quickly, while the release of the new Business Rate Multipliers will have the greatest near-term impact on the UK property market. 

"Business rate reform had been mooted as a way to shift the tax burden away from bricks and mortar retail, hospitality and leisure businesses and towards ecommerce logistics hubs and data centres, levelling the playing field between the high street and digital companies. While wholesale reform remains on the horizon, these new multipliers will mean that properties with a rateable value of more than £500,000 will carry a greater proportion of the rates burden, with office and industrial properties in London and the South East expected to bear the brunt of these higher costs.  

“However, until the updated rateable values have been released, it remains unclear how much of the burden will shift towards those 21,000 commercial properties across the UK thought to have a rateable value of above £500,000.  With the OBR indicating that the 2025/26 tax take from business rates is set to rise by 5% on the year before, the Government may prefer to bank the increased tax receipts before making more radical changes.”   

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Budget 2025: EY comments on the changes to VAT treatment of charitable donations at the Autumn Budget

Carolyn Norfolk, Indirect Tax Partner at EY, comments on the changes to VAT treatment of charitable donations announced at the Chancellor’s Autumn Budget: “Following a consultation earlier this year, the Government has confirmed that it will remove the charge to VAT where businesses make charitable donations, removing a significant barrier to companies seeking to donate goods. Previously, it could be more cost effective to scrap goods rather than donate them.  

"Addressing this anomaly will not only help with the cost-of-living crisis but also support the environmental agenda by reducing wastage. To further the Government’s digital inclusion aims, there is a higher limit for digital assets. However, the relief does not extend to community interest companies (CICs) and social enterprises, a gap that could benefit from being plugged in future.”   

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Katie Selvey-Clinton, Capital Allowances Tax Partner at EY, comments on changes to capital allowances announced in the Chancellor’s Autumn Budget:

“One of the Budget’s largest revenue-raising business measures is the reduction in the capital allowances rate on plant and machinery, forecast to generate £7bn in cash flow over the next five years. Whilst most new assets benefit from generous 100% full expensing allowances, this new measure erodes the tax relief available for older assets and second-hand purchases, which are specifically excluded.

“Limiting incentives to new assets restricts the relevance for second hand transactional markets such as infrastructure and real estate, and doesn’t reflect the desire to reuse and recycle. The new 14% rate means it will now take over 16 years before the asset is fully written off.”  

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Chris Taylor, EY Indirect Tax Transformation Partner and E-invoicing Lead, comments on e-invoicing measures announced in the Chancellor’s Autumn Budget:

“The announcement on e-invoicing in today’s Budget, requiring all VAT invoices to be issued in a specified electronic format from April 2029, is a significant step forward and provides certainty for businesses in terms of timeframe. It also aligns the UK with a number of other markets across Europe who are going live with e-invoicing legislation in 2026.

“The Government has explicitly recognised the important role e-invoicing will play in supporting HMRC’s digitalisation goals over the coming years, as well as its ability to reduce the VAT gap.  The announcement follows an initial consultation earlier this year and shows that HMRC is continuing to see the progress and benefits of e-invoicing in other major economic markets.  Whilst not meeting Malaysia’s implementation record of two years, HMRC’s timelines align to those of other major markets who typically move from initial consultation to formal legislation in between three and five years.

“An implementation roadmap is expected to be published at Budget 2026 and businesses will need to be ready to engage to ensure that there is as little disruption as possible.”

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Andrew Ogram, Energy Tax Partner at EY, comments on energy measures announced in the Chancellor’s Autumn Budget:

“This Budget’s energy measures shift more of the costs to decarbonise the economy from energy bills onto general taxation while layering in new, targeted charges.

“Moving some levies off electricity bills and expanding the Warm Home Discount to all households on means-tested benefits will be felt most directly by low-income consumers and by electricity-intensive businesses that benefit from slightly lower unit power costs. General taxpayers will increasingly underwrite policy costs that were previously recovered through tariffs, while the Sizewell C Regulated Asset Base Levy and other charges mean that part of the cost to decarbonise will still be visible on electricity bills, particularly for larger commercial users.

“For investors, changes to the structure of certain levies should deliver more bankable long-term cash flows for new nuclear and other low-carbon projects, but concerns will remain about UK industrial power prices and their impact on UK competitiveness relative to peer economies.

“In the North Sea, the lack of substantive reform to the Energy Profits Levy will disappoint industry hopes for an early withdrawal before March 2030. Following consultation, the Government has announced its intention to introduce what is essentially a tiered royalty when the EPL ends. Overall, the UK remains one of the most complex and uncertain upstream tax regimes among mature basins.

“Taken together, the package nudges the UK towards cheaper low-carbon electricity but highlights the trade-offs between lower bills in the short-term, the need to raise revenue in the long-term and the stability of the investment environment for both low-carbon and conventional energy projects.”

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Budget 2025: EY comments on the industrial impact of the Autumn Budget

“This Budget’s energy measures shift more of the costs to decarbonise the economy from energy bills onto general taxation while layering in new, targeted charges.

Mark Minihane, UK&I Industrials and Energy Tax Leader for EY, comments on the industrial implications of the Chancellor’s Autumn Budget: “Renewed support for decarbonisation, renewable energy projects, grid upgrades and digital infrastructure will have been on the Budget wish lists of many industrials and energy businesses. Industry groups have called for measures to lower energy costs, expand competitiveness schemes and introduce targeted incentives for electrification and clean energy investment. While today’s announcements present opportunities for businesses investing in efficiency, sustainability, and advanced technologies, there remain rising costs and regulatory risks for energy-intensive or carbon-heavy operations. 
 
“When it comes to modernising UK industry and accelerating the transition to net zero, stability and clarity around reliefs will be crucial to giving companies the confidence to commit to long-term capital projects. On this front, collaborative research and development (R&D) cash grants of up to £20-50m depending on project size and scope, and the pledge of an additional £1.5bn to extend the DRIVE35 programme to back the automotive sector, will provide crucial support. However, UK industry continues to navigate complex challenges and may require further targeted measures to build on these advances.”

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Chris Sanger, UK Tax Policy Leader at EY, comments on measures announced in the Chancellor’s Autumn Budget:

“The Chancellor delivered on the speculation of a “smorgasbord” of measures, with 44 tax measures raising a net £26.6bn per annum by 2030-31. The benefit of a smorgasbord is that the diner can choose their dishes, but the Budget was more of a stew, serving up all the measures together in one meal.

“The ‘meat’ of the Budget was the threshold freezes, the increase in employment and savings taxes, the new council tax surcharge and the mileage charge on EVs. In terms of sweeteners, there was the usual freeze in fuel duty and an extension of the Enterprise Management Incentives. More neutral were the changes to allowances for capital investment by businesses, with a new first year allowance but reductions in allowances for the subsequent years.

“Overall, the Chancellor delivered a Budget that raised less in taxes than last year and maintained the Government’s manifesto commitments, making it as palatable as could be expected for a revenue raising Budget. The Treasury Red Book ran to 146 pages but, with the Finance Bill due out next week, there is plenty of detail still to come.”

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Budget 2025: EY comments on the economic impact of the Autumn Budget

Peter Arnold, EY UK Chief Economist, comments on the economic implications of the Chancellor’s Autumn Budget:

“Pre-Budget speculation around the need for up to £40bn of tax rises proved slightly off the mark. Although the Office for Budget Responsibility (OBR) downgraded its growth forecast for the UK economy post-2026, stronger nominal wage growth is expected to lead to a more tax-rich economy than previously expected, even before the announced revenue-raising measures. The Chancellor was therefore able to increase taxes by a more modest £26bn, with freezes to income tax thresholds doing much of the heavy lifting – equivalent to about 60% of the total. This has more than doubled the Chancellor’s headroom against her fiscal rules to £22bn, even when combined with an £8bn increase in spending.

“This additional headroom could reassure bond markets on the sustainability of the UK’s finances, which in turn could bring down debt interest payments. Further, a number of measures taken by the Chancellor, particularly in lowering energy prices for domestic and business users, will be disinflationary, reducing inflation by 0.5% in 2026. This could open a pathway to quicker and more substantial rate cuts from the Bank of England. 

“However, the profile of the changes in taxation and spending represent a risk, given increasing spending is front-ended, while tax rises are back-ended, which could be challenging to deliver in the lead up to a General Election. The Chancellor will also likely be disappointed that the OBR did not include any positive adjustments to its forecasts from the trade deals with India and the EU, nor from any of the Budget’s pro-growth measures such as the Youth Guarantee, the Growth and Skills Levy and wider skills and employment support packages, which together are worth around £1.5bn across the Spending Review period.” 

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Sarah Farrow, UK Private Client Services Partner at EY, said:

“Today the Chancellor chose to increase the tax on savings, both through two percentage point increases in the tax rates on property, savings and dividends, and restricting relief for cash ISAs. Given the exemptions for small amounts of saving income, this may fit with raising taxes from those with the broadest shoulders, but could act as a further deterrent for passive investment.

“Beyond the £2.3bn hit on savings, the Chancellor also restricted NICs relief for salary sacrifice pension contributions and froze Income Tax thresholds, netting £15bn combined. These changes will begin to impact people’s pay packets from 2029, perhaps leading to the disinflation that the Chancellor was looking for.

“The Government has reiterated its ambitions to make the UK more attractive for entrepreneurs, skilled professionals and investors. These individuals will have been anticipating today’s Budget with keen interest and, with measures now unveiled, transparency and stability, coupled with a clear focus on growth, will remain essential in enabling them to plan ahead and support future investment decisions. This will also ensure the UK continues to attract and retain investors, founders and entrepreneurs.”

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Laura Mair, EY UK&I Managing Partner for Tax and Law, comments on changes for business announced in the Chancellor’s Autumn Budget: 

"The Chancellor announced a package of measures aimed at raising revenue but also driving up productivity, investing in key infrastructure and building business and investor confidence, all critical components for economic growth. Holding business tax rates steady provides welcomed certainty and allows businesses to focus on job creation and growth. 

"Many companies will likely feel relief that this Budget avoided mirroring the raft of business taxes announced last Autumn, with much of the focus instead on revenue-raising measures targeted at individuals and some targeted adjustments for companies.  Cutting low-value import relief should provide a competitive advantage to the UK high street, while proposals to reduce energy bills could offer valuable support to eligible firms in high-growth sectors like automotive and aerospace. Although the restriction of NICs relief for pension contributions given under salary sacrifice and the reduction in the main rate of capital allowances will add to company costs over time, and personal taxes may present challenges for consumer-facing sectors reliant on discretionary spending, this was a relatively quiet Budget for business.  

"Nevertheless, businesses continue to shoulder a substantial amount of the UK's overall tax take and face elevated labour costs. Delivering on the Government's priority growth mission will clearly require further measures designed to support business activity and investment, particularly across key sectors identified in the Industrial Strategy. EY data shows that the UK remains one of Europe's leading destinations for inward investment in high-growth sectors like financial services, digital technology and life sciences. Businesses will be hoping that the last two Budgets provide sufficient fiscal headroom to fuel future incentives aimed at attracting more capital into these strategically important industries."

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Paul Kitson, EY Pensions Consulting Leader said:

“The Chancellor’s decision to place a £2,000 cap on salary sacrifice pension contributions from 2029 is another material cost to businesses, who were already hit by the increase in employer National Insurance introduced earlier this year. Significantly, this decision will also likely impact workers, effectively reducing the value of their pension pots, when worries around having adequate funds for retirement are already high.

“While fiscal challenges may need to be addressed and the Chancellor has steered clear of more significant limits (e.g. removing the NI exemption entirely), this is still a challenging policy change for businesses. While the change won’t come into effect until 2029, in practice, it may be difficult to administer, and significant time will need to be spent by businesses working out the operations, which may counteract the benefit the Treasury hopes to achieve. The measure could also have longer-term implications, by risking the attractiveness of pension savings at a time when this should be being actively encouraged.”

Media contacts

Victoria Luttig - Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

James Guthrie, EY Financial Services Tax Partner, comments on ISA reform announced in the Chancellor’s Autumn Budget:

“The Chancellor’s decision to reduce the annual allowance in Cash ISAs from £20,000 to £12,000 for under 65s has been prompted, at least in part, by a desire to encourage greater flows of investment from cash into higher-growth investments like stocks and shares to ultimately boost the UK stock market and economy and drive greater returns for savers. This will likely bring a mixed reaction from individuals and businesses.

“While promoting informed investment decisions and supporting UK businesses is a plus, a consumer shift into stock market investment is certainly not automatic. Demand for cash ISAs has been rising, as more risk-averse savers and those with short-term plans for their savings, for example for property, often see them as a safe home for their money. These individuals may not want to switch a sizeable portion of their funds into stock market shares. Ultimately, this move could result in people saving less.

“Equally, for banks who leverage cash ISAs as funds for household and business loans, this decision could create challenges, potentially leading to higher interest rates, stricter lending criteria and reduced access to capital for firms.”

Media contacts

Victoria Luttig - Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Andrew Pilgrim, EY UK Government and Financial Services Leader, comments:

Chancellor announced a package of measures which aim to drive business and investor confidence, and UK economic growth. There had previously been some talk around potential changes to the banking tax rates, however the decision to hold these steady provides welcome clarity and certainty.

“While UK banks will continue to pay a higher tax contribution compared to other sectors and indeed other nations, the lack of increase is a small but reassuring sign that the Government is listening to the concerns of the sector. With the Budget now behind us, UK banking and wider financial services leaders will look to continue working effectively with Government to drive forward efforts to embrace emerging technologies, support job creation and ultimately ensure the UK remains a globally competitive place for financial firms to invest and do business.”

Media contacts

Victoria Luttig - Manager, Media Relations, Ernst & Young LLP

26 Nov 2025 | EY comments - Autumn Budget 2025

Silvia Rindone, EY UK&I Retail Lead, comments on retail sector measures announced in today’s Autumn Statement

"Today’s Budget announcement introduced measures that will impact the retail landscape and influence consumer behaviour for years to come. The proposed tiered business rates system offers welcome relief for smaller retailers, helping to ease cost pressures at a time when margins are tight. However, the additional burden placed on larger operators could lead to more expensive food bills for consumers – further challenging high street vitality and consumer choice. 

“Consumer confidence has deteriorated sharply in the last 12 months, and persistent inflationary pressures and rising living costs mean sentiment has remained fragile.  

“Closing the import duty loophole for small parcels is a positive step towards fairer competition, but it could also push up online prices, prompting consumers to reassess buying habits. For premium retailers, concerns will centre on whether higher taxes erode the spending power of their core customer base. 

“While some measures will level the playing field for domestic retailers, the cumulative effect of tax changes and cost adjustments could temper spending, particularly in non-essential categories. Retailers will need to adapt quickly, prioritising value-driven propositions and omnichannel strategies to maintain engagement in an environment where affordability and trust will drive purchasing decisions.”

Media contacts

Justin Moll - Manager, Media Relations, Ernst & Young LLP 
Chris Brown - Manager, Media Relations, Ernst & Young LLP

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