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For the first time in 14 years, it was a Labour chancellor who delivered the UK budget. And for the first time ever, that chancellor was a woman. But Rachel Reeves faces an almighty task: plugging a £40 billion spending gap in the knowledge that pre-election promises not to raise the main taxes are still fresh in people’s memories.

Growth was the buzzword of the election campaign – Reeves now had to lay her cards on the table. So here’s what our panel of experts made of the plans:

More challenges for employers and small businesses

Shampa Roy-Mukherjee, Associate Professor in Economics, University of East London

The budget introduces £40 billion in tax hikes and, in some areas, spending cuts that will put pressure on the economy and business in particular. But it also reflects the government’s focus on economic growth, with policies intended to stabilise finances while addressing some of the concerns of small businesses.

The chancellor has retained her commitment to preserve the rates of income tax, employee national insurance and VAT. But a notable change is the increase in employers’ national insurance contributions (NICs) from 13.8% to 15%.

There was also a reduction in the secondary threshold, which is the amount at which the employer starts paying NI on each employee, from £9,100 to £5,000. Altogether this will raise £25 billion annually but will significantly impact many businesses that will now face higher wage bills.

The national living wage is also rising by 6.7% to £12.21 per hour in April 2025, boosting incomes for about three million workers but again increasing costs for many businesses. These rising taxes and wage increases, alongside incoming employment regulations, will strain businesses, particularly in sectors with high labour demands.

To offset some of these pressures, the employment allowance, which allows some smaller employers to reduce their NICs, has been raised from £5,000 to £10,500. The chancellor said that over 1 million employers will not see their NICs bill rise as a result.

Small businesses in retail, hospitality and leisure, where profits have been hit as consumers struggle with the cost of living, will benefit from a 40% business rate relief on properties up to £110,000. Other supportive measures include a continued freeze on fuel duty, which will aid logistics and transport costs. Corporation tax remains fixed at 25%.

A downpayment on growth – but probably not quickly

Linda Yueh, Adjunct Professor of Economics, University of Oxford

The chancellor declared that the government will “invest, invest, invest”. This is an important enabler of economic growth.

But, the country’s creditors need reassuring, so Reeves also announced two new fiscal rules that aim to achieve that balance of allowing the government to borrow to invest (and generate growth), but not to pay for day-to-day spending.

Specifically, the investment rule permits borrowing to invest and the stability rule requires day-to-day spending to be paid for by taxes. Both rules support the government’s growth aims while trying to reassure the country’s creditors that the borrowing will pay off by generating future growth – and also higher tax receipts with which to repay that borrowing.

But spending watchdog the Office for Budget Responsibility (OBR) has downgraded the UK’s from 2% to 1.8% in 2026, and to 1.5% in 2027 and 2028. The OBR’s forecast of slower growth highlights the impact of the £40 billion of tax increases, which dampens economic activity.

This underscores the government’s challenge of investing to grow while at the same having to raise taxes to balance the books when it comes to its daily spending. In particular, the OBR’s assessment of slowing growth towards the middle of this parliament raises questions about how long it will take for the investment-fuelled growth to materialise.

It may be that five years is still too short a period. Many physical investments require planning and those reforms could also take a while. Moreover, getting investment projects under way requires scoping, and private investors will want time to assess before joining the government in energy projects.

But this budget is certainly a start on a much-needed growth strategy.

Good news on public investment – emerging industries could benefit

Phil Tomlinson, Professor of Industrial Strategy, University of Bath

The key budget change related to the chancellor’s fiscal rules. By redefining how public debt is calculated, Reeves has been able to increase public investment by around . The new fiscal rules have gone not as far as some – but they are a welcome step in the right direction.

Investment was the core focus of the budget. For decades, the UK has suffered from low investment and weak productivity compared to other leading economies. Since 1990, the UK’s investment gap with the average across rich countries in the Organisation for Economic Co-operation and Development (OECD) has been around £35 billion a year – the UK now ranks OECD countries on business investment. British workers are using outdated kit and so are less productive. This has meant a stagnant economy and lower living standards.

So, the budget’s plans to boost investment in the UK’s crumbling infrastructure and public services and to support the are a positive move. The latter should see additional funding to support emerging tech industries, such as artificial intelligence, cyber and clean energy. And this public investment should “crowd in” additional private investment.

In the long run, these investments should pay for themselves. For instance, the Office for Budget Responsibility that a sustained increase in public investment of 1% of GDP increases that GDP by 0.5% after five years and more than 2% after ten to 15 years.

The rise in employer national insurance contributions will increase business’s operating costs, especially those in the care and hospitality sectors. But paradoxically, in the long run, it may encourage some businesses (in sectors where it is feasible) to invest in new labour-saving capital equipment.

More reaction to be published soon.