What the 2025 Spring Budget means for small businesses

On Wednesday, 26 March 2025, Chancellor Rachel Reeves made her highly anticipated Spring Budget speech.

This year's statement was primarily focused on cuts to welfare spending and rising defence costs. As such, there was very little laid out in the chancellor’s speech that will affect small businesses, the self-employed and landlords.

The context

The Chancellor is the government's chief financial minister, and the Spring Budget is their opportunity to set out plans for the UK economy.

Every year, the Chancellor of the Exchequer typically makes two speeches to the House of Commons to outline the government’s financial agenda: the Autumn Statement and the Spring Statement, sometimes called Autumn and Spring ‘Budgets’.

What’s the overall economic forecast?

On the same day, the Office for Budget Responsibility (OBR) — the body that monitors public spending — publishes its assessment of the plans. As the independent public finances forecaster, this is their independent assessment of the expected impact of the policies announced in the statement.

These predictions may not come to pass, but it’s effectively a best guess.

Ahead of the 2024 Autumn Statement, the OBR predicted the UK economy would grow by 2% this year. This week, they revised their prediction down to 1% growth — a number Reeves says she’s “not satisfied with”.

Over the long term, however, the OBR says there will be year-on-year growth until 2029. This is an upgrade to its previous forecast. It predicts GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.

What’s GDP?

GDP (aka gross domestic product) tells you how much stuff a country makes and what services it provides. It takes into account everything from your neighbourhood bakery to a nationwide tech firm, all rolled into one figure. It covers goods, services and all the bits in between. If it’s bought and sold, it’s counted.

Because GDP is a pulse check for the economy, if it’s going up, it usually means businesses are doing well, people are earning and there’s more cash to splash. If it’s going down that’s when talk of recessions, job losses and budget cuts tends to creep in.

The GPD figure helps governments make decisions (spend here, save there), gives investors confidence and shapes everything from interest rates to your weekly shop.

What about inflation?

In its statement, the OBR also highlighted a potential rise in inflation this year, due to higher oil prices and a rise in wholesale gas prices. The forecast is that it will peak at 3.2% this year, up from 2.6%, which was previously forecast.

But it tempered this with the prediction that inflation levels will drop back to 2.1% in 2026 "as energy prices drop, food price inflation falls and wage growth eases back".

Inflation is essentially a measure of how much prices have increased across the economy compared with the previous year. As of February 2025, the Consumer Price Index (CPI) measure of inflation (there are others) sat at 2.8%, down from 3% in January. In February 2023, inflation sat at 10.4%.

This means that the average cost of household goods (or “shopping basket” as the ONS calls it) was 0.2% lower in February 2025 than in January 2025, and down 7.6% from February 2023. You can read more about how the Office for National Statistics (ONS) calculates the CPI on their website.

So will interest rates go down?

When inflation is high (meaning prices are rising faster than usual), the Bank of England often steps in and raises the interest rate to cool things down. Higher rates make borrowing more expensive and saving more appealing, which usually means people and businesses spend less. That drop in demand can help bring prices back under control.

On the flip side, when inflation drops or the economy looks sluggish, the Bank might cut interest rates. Cheaper borrowing can boost the economy by adding more spending, investment and momentum.

So with inflation at 2.8% and predicted to rise to 3.2%, what does this mean for interest rates? Well, the inflation rates are still above the Bank of England’s 2% target, but the current downward trend (from 3% in January) is strengthening the case for interest rates to be cut as early as May.

Get more info on what interest rates mean for small businesses.

A note to finish on

It seems that while businesses and landlords are less affected by the 2025 Spring Statement, there were several measures laid out in the 2024 Autumn Budget that will have an impact.

From National Living Wage and National Minimum Wage increases to increases to statutory sick pay and parental pay as well as business rates adjustments — there's a lot on the cards for 2025.

Take a look at our guide on the changes to the law in 2025 that could affect your business for more detail.