UK Government in 2025: Navigating Economic Challenges with Bold Reform Agenda

Economic Outlook and Government Strategy

The Office for Budget Responsibility (OBR) forecasts UK economic growth of 1.0% in 2025, with an acceleration to 1.9% expected in 2026. The growth forecast has been increased for 2026 and subsequent years. Growth has faced challenges as many of Britain’s major trading partners experience slowdowns, leading the Organisation for Economic Co-operation and Development (OECD) to downgrade its 2025 forecasts for all G7 economies.

Major Policy Initiatives

Following the election of the first Labour government since 2008 in July 2024, the administration has emphasized growth with technology and digital innovation as key components of their ‘pro-innovation approach’. Their direction has been outlined through the Labour manifesto, King’s Speech, October budget, and the Invest 2035 Industrial Strategy.

The government has committed to an additional £120 billion investment over the Spending Review period compared to Spring Budget 2024 plans. This includes significant funding for AI development, with new AI courses, fellowships, and a prestigious AI talent scholarship program. An AI Adoption Fund has also been established to support technological integration.

Housing and Infrastructure

Housing shortage remains one of the country’s primary growth obstacles, affecting job accessibility and city development. The government has committed to building 1.5 million homes and has delivered the largest annual budget for affordable housing in over a decade. Significant planning system reforms have been introduced, including the Planning and Infrastructure Bill and a revised National Planning Policy Framework.

Immigration and Border Control

In May 2025, the government published a white paper titled ‘Restoring control over the immigration system’, proposing measures to tighten migration controls. While some of these proposals have already been implemented, most are still pending, with the government planning future changes.

Future Outlook

The government has initiated its first zero-based review in 18 years, examining all government spending to ensure value for money. All departments are required to identify at least 5% savings and efficiencies by 2028-29, indicating a strong focus on fiscal responsibility alongside ambitious reform plans.