Spending Review 2025: Positive steps taken in pursuit of economic growth, but questions left unanswered

The Chancellor, Rachel Reeves, has today delivered the 2025 Spending Review, one of the most significant moments in the political calendar. Unlike the Budget, which focuses on immediate tax and spending decisions, the Spending Review outlines how public money will be allocated across government departments for the coming years up until 2029.

This Spending Review signals a clear shift away from austerity toward long-term investment, underpinned by new fiscal rules. The Chancellor has stated that these rules allow for increased spending while maintaining economic responsibility. The Spending Review aims to drive sustained economic growth by supporting key sectors such as health, defence, infrastructure, green energy, skills, and innovation. There is much to welcome, but key questions remain around how these promises will be delivered and funded.

Health and Care: Investment signals ambition but needs a real workforce plan

As trailed in the media, health is one of the big winners in this year’s Spending Review The NHS in England will receive 3.0% real terms growth in day-to-day spending, equivalent to a £29 billion real terms “The Government has also pledged to increase the NHS technology budget by 50 percent, aiming to modernise services and improve productivity.

This is a significant investment. But without a proper workforce strategy, its impact could fall short. The previously announced decision to reduce agency staffing sends the wrong signal. Flexible and temporary workers are not simply a cost issue, they are a critical part of keeping services running, especially under pressure. When procured properly, they can be cost-effective and efficient.

Hiring is still too slow and disconnected from demand. The recruitment sector must be a partner in developing a comprehensive workforce strategy that ensures the right people are in the right place at the right time. Social care remains under-supported, despite its vital role in relieving NHS pressure. Funding, reform and recognition of the care workforce must follow.

The forthcoming NHS workforce plan must reflect the real dynamics of today’s labour market. Without involving recruiters and employment experts, it will fall short of what is needed.

Infrastructure to boost UK connectivity and job opportunities

The Spending Review outlines £113 billion in capital investment to boost national infrastructure. Major rail schemes such as the Trans-Pennine upgrade, East West Rail, and the Midlands Rail Hub have been confirmed. Transport for London has received a four-year funding settlement, and local transport grants have increased significantly. The £3 bus fare cap will continue through to March 2027.

These are positive and ambitious commitments that will improve connectivity and support regional economies. But delivery relies on having the people who will plan, build, and maintain this infrastructure.

Green Economy: Public private partnership welcome but this approach needs to be rolled out across the board.

The UK’s commitment to becoming a global leader in green energy is strongly reinforced. Over £14 billion is being directed to nuclear projects such as Sizewell C and small modular reactors, with 10,000 jobs being created to deliver these. Investment also continues in carbon capture, green manufacturing, and low carbon infrastructure.

It is important that the right processes are put in place to build the necessary talent pipeline. Encouragingly, the nuclear sector is already showing what works, with public private partnerships developing the next generation of skilled engineers. This model needs to be adopted across the wider economy.

This agenda could be highly positive for the recruitment industry, as demand for specialist skills and flexible labour will grow. But success depends on coordination. Without a joined-up workforce strategy, backed by long term training and recruitment plans, the UK risks falling short of its net zero goals.

Skills and Innovation: Strong investment needs smarter coordination

The Chancellor has rightly recognised the importance of skills and innovation in driving growth. The Spending Review includes £1.2 billion for apprenticeships and youth training, with research and development spending set to rise to £22 billion by 2029. A further £2 billion has been allocated to the AI Opportunities Action Plan.

This is a welcome shift. But there is still a disconnect between what is funded and what the labour market actually needs. Too often, training programmes are designed in isolation from employers and recruiters who understand where demand is growing.

Skills must be treated as critical national infrastructure. Programmes should be aligned with live vacancies, regional needs and sector priorities. The recruitment industry can provide the insight and agility needed to ensure these investments translate into economic results.

Backing Business: Finance is crucial but skills will unlock growth

One of the strongest signals in the review is the expansion of the British Business Bank’s capacity to £25.6 billion. This strengthens the financial support available to small and medium sized enterprises, including many recruitment businesses. The launch of a new Growth Mission fund to support local businesses and communities further highlights the government’s place based approach.

These are important moves that offer businesses more confidence to invest. But money alone will not deliver growth. Without the people and skills to take advantage of these opportunities, progress will stall. Financial capacity must be matched by labour market capacity and that means more support for recruitment and workforce development.

Defence and Security: Investment must be matched by skills

Defence spending is set to rise to 2.5 percent of GDP by 2027, fulfilling a long standing pledge and putting the UK on a trajectory toward its wider strategic goal of 3 percent. The funding will support armed forces modernisation, investment in defence manufacturing, and job creation in high tech sectors.

The ambition is to turn the UK into a defence industrial superpower, with strong investment in the North and Scotland. However, these new jobs will only deliver if people have the skills to fill them. Training, recruitment and education must work hand in hand to make this vision a reality.

The 2025 Spending Review marks a turning point in the UK's economic strategy. The Government is looking at the long term, with welcome commitments across public services, infrastructure, green energy and defence. But the success of this plan will come down to people. Every pound committed relies on having the right workforce in place to deliver. Without this, ambition will not translate into outcomes. Further to this, we await further details on how the commitments will be funded, and business should not be footing the bill, with further financial burdens, as this risks damaging the growth agenda. The recruitment and employment industry stands ready to help the government bridge this gap. With the right partnerships, insight and planning, we can turn this ambitious vision into a practical reality—matching talent to opportunity and building an economy fit for the future.