Director Weekly  The Budget delivered on promises of modest relief for households and a minority of businesses, but lacked game-changers for growth.

Yet this was also a missed opportunity, delivering no meaningful boost to economic growth and avoiding major decisions on spending.

Here’s our evaluation of the big take-aways for business.

Which of the IoD’s asks were addressed?

The IoD set out five priorities in our Budget Submission to the Treasury.

On our first, growth-first fiscal discipline, it’s a case of steady as she goes. The overall fiscal picture is little changed; the impact of this Budget on tax and spending plans are minimal compared to the last two years, particularly 2024. Much-needed decisions on public spending were left for another day.

Our second priority was growth-friendly tax reform. As promised, there was support for the high street: retail, hospitality and leisure will benefit from a higher business rates relief threshold. And, after promising to support ‘bloody minded entrepreneurs’, the Chancellor came up with some welcome measures for founders, but with a sting in the tail from further cuts to Business Asset Disposal Relief.

But the increase in the tax surcharge on banks represents a fresh attack on the UK’s successful large businesses. Even though it is only being applied on a 15-month basis and, at 3%, is more modest than the industry feared, it will do little for the UK’s appeal to global investors. And there was no commitment to fundamental tax reform, such as addressing distortions in the income tax schedule, moving to a settled position on the taxation of capital, or reforming business rates.

Third, faster action on regulation remains sorely needed. A promise not to add more rules on house building is hardly a breakthrough, while the delay in the Your First Home programme until April 2027 risks suppressing the housing market further in the meantime. Our members welcomed the £800 million reduction in regulatory burdens on small business, and the re-creation of the Better Regulation Executive is a welcome signal of the government’s commitment to broader regulatory reforms. But significant reforms are yet to come.

More welcome was the decision to halt measures to close the gap between the youth minimum wage and the main rate. That will at least stop further damage to young people’s prospects of finding a job.

And there were measures intended to bring down electricity costs – albeit with the rather unambitious target of bringing them in line with competing European economies, with a promise to deliver cheaper, faster grid connections via GB Grid and a cost control framework to be included in the Spending Review.

Rating the Budget against our tests

Last week, we set out five tests for a pro-Growth Budget. Here’s the verdict.

1. Does it make business more likely to invest? No. There were no significant measures to encourage investment and the overall tax burden on businesses rose further. Our snap poll shows investment intentions fell back modestly after the Budget.
2.  Does it reduce the costs of employment? No. The last two Budgets heaped costs on employment and this was a missed opportunity to reverse at least some of the damage. The surprisingly large £2.6 billion spent on a poorly-targeted £100 energy-bill giveaway could have been better used elsewhere, such as bringing down the cost of employing young people.
3.  Does it protect fiscal stability? Yes. Markets responded positively, with yields down 0.06 percentage points on 10-year gilts the day after the Budget. That outcome will be much celebrated in the Treasury.  
4.  Does it drive radical improvements in public sector performance? No. There was some tough talk on controlling public spending no detail. Meanwhile, devolution plans – while welcome – entail significant structural change in the public sector just as budgets start to bite. The government needs to quickly work out how to deliver substantial productivity improvements if it is to avoid significant cuts to public services in next year’s Spending Review.  
5.  Does it encourage UK businesses to unlock the AI opportunity? A mixed picture. There was nothing to directly support business adoption, but there was a smattering of other AI-related measures. As announced ahead of the Budget that included an additional £120 million for the AI Security Institute and £60m for a National Cyber Shield to improve the UK’s cyber defences.

Overall, this Budget largely delivered on the brief that the Chancellor had set out. But there was no game changer for growth, and that’s a risky stance amidst ongoing uncertainty. Living standards remain under pressure, housebuilding targets will not be met, distortionary taxes remain unreformed, and the UK’s capacity to meet further shocks continues to be eroded.

The sound of cans being kicked down the road echoed through Whitehall this week. All eyes will be on next year’s Spending Review as the big test of the Government’s resolve in tackling the hard choices needed.

The IoD Director General welcomes support for start-ups and scale-ups

Read Jonathan Geldart’s response to the Budget here.