UK Budget 2025: PwC UK’s Chief Economist comments on Economic impact

Barret Kupelian, Chief Economist, PwC UK said:   
 
“These finishes what last year’s Budget started. With fiscal headroom sharply reduced, though not wiped out, the Chancellor chose to tighten the purse strings, raising roughly £24 billion in taxes and increasing spending by around £2 billion at the end of the forecast horizon. The result is that she has doubled her margin against the stability rule to about £26 billion. In short, this was a tax and save Budget rather than a tax and spend one.

“On timing, the Chancellor front-loaded support by increasing near-term spending, largely through changes to the two-child limit and the reversal of earlier welfare reforms, both of which will push up borrowing. Most of the tax rises arrive from 2027–28 onwards. Whilst financial markets may be sceptical of this approach, the fact that much of the additional revenue comes from freezing income tax thresholds gives the strategy a firmer footing.

“So where does this leave us? With headroom now rebuilt and the proposal to assess the fiscal rule annually rather than twice a year, medium-term fiscal policy looks more predictable. Headroom is like oxygen: you do not notice it until it runs thin. We therefore think that this will give businesses and households greater confidence to start investing and spending over time.”

Our full Budget reaction