What it means for small business owners
Rachel Reeves’ first Spending Review, delivered with a clear focus on long-term national renewal, places infrastructure, energy transition, and public service investment at the heart of the new government’s fiscal strategy. For small business owners, the implications are mixed: while the broader economic ambitions are welcome, immediate support for SMEs is limited and largely indirect.
Growth & investment: ambitious but delayed impact
The Review outlines £113 billion in capital investment over the next three years, covering transport infrastructure, social housing, green energy, and digital innovation. While these investments are intended to drive long-term economic growth, they offer limited short-term relief to small businesses dealing with ongoing cost pressures, recruitment challenges, and economic uncertainty.
Many SMEs will welcome investment in regional transport and housing as potential drivers of local demand and employment, particularly those in construction, logistics, and property-related services. However, the tangible benefits are unlikely to be felt in the current financial year.
Net-zero & the green economy
Reeves’s emphasis on net-zero objectives - allocating more than £60 billion to green initiatives, including £13.2 billion for home insulation and £8.3 billion to establish Great British Energy - signals a major shift in environmental policy. Businesses operating in renewable energy, energy efficiency, or green construction may benefit directly.
However, the lack of targeted incentives or grants for smaller firms to decarbonise their operations may limit broader SME engagement with the net-zero agenda. Small business owners looking to retrofit premises, electrify vehicle fleets, or reduce energy costs will likely be waiting for more specific support mechanisms.
Labour market & skills: a missed opportunity?
While the Review includes increased funding for the NHS and defence, education and skills funding was relatively static. For small businesses already struggling with recruitment and a lack of industry-ready applicants, this represents a missed opportunity.
In sectors such as manufacturing, construction, and hospitality, the shortage of skilled labour remains one of the most significant barriers to growth. The increased burden of employment - through rising wage costs, pension obligations, and compliance - also acts as a further detractor to growth, particularly for micro and small employers with limited HR and financial capacity.
Without a stronger emphasis on vocational education, apprenticeships, and retraining, many SMEs will continue to face workforce constraints.
Efficiencies, budget cuts & administrative impacts
Reeves has announced £14 billion in departmental savings by 2028–29 through efficiency measures, including digital transformation and “zero-based budgeting.” While the aim is to redirect funds to high-priority areas, such savings often translate into leaner public services and longer administrative timelines - factors that frequently impact small businesses disproportionately.
From grant applications to licensing and HMRC interactions, small firms are likely to feel the effects of reduced departmental capacity before larger corporations do.
Tax, rates, and financial support
The Review avoided immediate changes to personal or corporate tax rates, and made no reference to business rates reform - something many small business groups have campaigned for. Likewise, there was no mention of new SME grants, start-up incentives, or direct relief for sectors still recovering from the pandemic.
The current business rates system continues to weigh heavily on bricks-and-mortar businesses, especially in retail and hospitality. Without reform, this remains a major fixed cost burden that inhibits reinvestment and growth.
In summary...
Rachel Reeves’s Spending Review sets out a confident, strategic vision for rebuilding national infrastructure and transitioning to a green economy. For small business owners, however, the Review offers few immediate interventions or structural reforms that would ease operational pressures in the short term.
The broad policy direction is likely to be welcomed - particularly in terms of long-term stability and investment confidence - but it remains to be seen whether the government will follow up with more targeted support for the SME sector, which plays a vital role in delivering economic growth, innovation, and regional employment.