Unpacking the Autumn Budget

About the panel  

The 2025 Autumn Budget set out to ease the cost of living, reduce NHS waiting times, and tackle government debt. To raise £26bn, Rachel Reeves introduced tax measures such as freezing personal tax thresholds until at least 2030/31 and increasing rates on dividend, property and savings income.

But can these changes really generate growth and prosperity? A panel of specialists from Investec and Rathbones explored the potential impact in a discussion hosted by Martin Vander Weyer, Business Editor of The Spectator.

The panellists were:

- Philip Shaw, Chief Economist, Investec

- Arjun Chopra, Head of Private Capital UK, Investec

- James Hurrell, Trust Director, Rathbones

- John Wyn-Evans, Head of Market Analysis, Rathbones

Here are the edited highlights:  

The big picture  

What are the biggest Autumn Budget talking points for you?

Philip Shaw: As an economist, numerically, it was job done. The fiscal rules are on course to be met, with increased headroom. More than £20 billion was achieved by a tax-raising budget. Note for readers: The ‘fiscal headroom’ is the margin for error built into the Treasury’s tax and spending plans, in case tax receipts are lower than expected or spending is higher.  

John Wyn-Evans: I was focused on what the impact on markets was going to be. Gilts and sterling reacted reasonably positively, which reflects relief that measures weren’t worse. What was missing from this Budget? A strategy to increase growth, investment and innovation. One feels that in the long term this is going to be the Achilles’ heel of the economy.

James Hurrell: It was a surprise that while the government didn't put up income tax rates across the board, as was well- trailed before the Budget, there was an increase in income tax rates for people who receive dividends or property-based income.  

Arjun Chopra: For me, the biggest talking point is the impact on business sentiment. I work with owner-managed businesses, and the leaders of those companies. Some feel the government has claimed to be business-friendly but hasn’t delivered. Others question what the future might be like, given the ‘spend now, tax later’ approach that was adopted.

The aftermath – the economic and market impact

Has the market reaction changed the outlook for inflation, growth and interest rates?

Philip Shaw: The tax increases are backloaded. This means there isn’t any fiscal consolidation planned until 2028/29. In terms of interest rates, inflation is still likely to fall, and we are still expecting a cut in interest rates this month from the Bank of England, and perhaps three more next year. We predict a Bank Rate of 3% by the end of 2026.

The Budget itself doesn't significantly affect the outlook. However, the government subsequently signalled the intention to action a request from the House of Lords and remove instantaneous protection for new workers from the Employment Rights Bill. This could provide a little bit of help for business growth.

John Wyn-Evans: In the 2024 Autumn Budget, my first reaction was that the £9.9 billion of headroom was too low to provide fiscal stability. Having £22 billion is better, but it’s still not a large sum in the grand scheme of things: the OBR forecasts the probability of the government hitting its Budget and fiscal rules at just over 50%. This means it’s a coin toss whether the OBR thinks the government will achieve what it has set out to.  

Budget day used to affect the UK market quite a lot, but these days it feels the stock market is a sideshow. That said, I saw one broking house reduce its forecast for a hotel brand by almost 10%, because of the impact of higher business rates. You can see the effects on equity markets, but they’re not huge overall.

How does the Budget impact private investment such as angel investors or venture capitalists?

James Hurrell: The Budget extends the pool of companies that could be eligible for investment incentives and increases the amount of funding they can receive in their lifetime. This means that if you invest through an Enterprise Investment Scheme (EIS) or Venture Capital Trust (VCT) you could invest in more established businesses with a higher number of employees or more assets, compared with before.

However, from April 2026, the tax relief on VCT investments will be reduced from 30% to 20%.  

Arjun Chopra: Our direct -lending team at Investec works with private equity funds to help them buy businesses, so we know the low and mid-market sector in the UK and Europe very well. Now the Budget is done, financial directors, CEOs and private equity professionals can forecast accurately and plan ahead. Secondly, in a weak or muted economy, there are opportunities for investors with capital to deploy, particularly in sectors which are consolidating.

The business community  

How are business owners and leaders reacting to this Budget?

Arjun Chopra: There is a sense that changes to business rates could end up hurting small and medium-sized companies. The way rateable values are calculated means the increase could be between £4,000 and £11,000 for pubs and more for a hotel. Other concerns include an increased dividend tax, as a lot of owner-managers and entrepreneurs use dividends to draw income from their businesses.

James Hurrell: As larger and more mature companies are now eligible for EIS and VCT-related investment, funding could become more accessible. In addition, doubling the annual investment limit and lifetime investment limits for EIS and VCT-related investment is likely to benefit companies that want to scale quickly.

What effect will policies like the ‘mansion tax’ have on individual investors, including property investors?

Arjun Chopra: In my opinion, this tax could hurt sentiment among buyers, as there is a fear that the rates could rise over time. I also think this could be a difficult tax to implement. Firstly, because it requires property valuations. Secondly, because the government is consulting on the options for deferral.  

Philip Shaw: In 1990, when Poll Tax was replaced with Council Tax, the government managed to revalue the stock of the UK property market in a very short space of time. This process is likely to have become easier, with the use of online tools.

However, I agree with Arjun that this could be perceived as a wealth tax and deter investors. Particularly, as revenue from this tax is not paid to the local authority, it is paid to central government.  

Were there any opportunities missed in this Budget?

Arjun Chopra: When you talk to people who own businesses or in certain subsectors, a number don't feel they benefit from a lot of the services they pay for. So, there is a bigger political and economic question about how money is spent.  

John Wyn-Evans:  There was speculation that stamp duty reform might be included in the Budget. Transaction taxes such as stamp duty on house purchases subdues housing market turnover, which can limit labour mobility. There was also an opportunity to remove stamp duty on equity transactions and this was not taken, which is disappointing at a time when the government wants to encourage more investment in UK-listed companies.  

While there is now a three-year stamp duty holiday on IPOs, this is a small change and is unlikely to dictate a company’s decision to list in London.  

Philip Shaw: I think the government will revisit how to reform the welfare state. The cost of non-age-related welfare is about £150 bn a year and rising. Around a million people under the age of 25 are not in education, employment or training, so I think we will see new proposals in future. There seems to be lots going on under the surface.

This article is for general information purposes only and should not be used or relied upon as professional advice. It is advisable to contact a professional adviser if you need financial advice. The opinions featured are not to be considered the opinions of Investec.