Spending Review 2025: time for tech

On 11 June, the Chancellor of the Exchequer is set announce the next major domestic policy event, the multi-year Spending Review. This will set departmental spending for the next three years and the decisions made will shape the course for this Parliament, and decade...

The Spending Review, and Industrial Strategy (which we expect will follow the SR), mark a pivotal moment and chance for the government to bolster confidence for the UK tech sector and wider economy. Onus will be on actions that provide the stability necessary to drive investment and for the government to commit to true partnership with industry (read more on this here).

Spending Review, what do we know so far?

Through Phase 1 of the Spending Review 2025, the government set public spending for 2024-25 and set departmental budgets for 2025-26 (read more on what this meant for the tech sector here).

The government aim to use this Spending Review to deliver a mission-led, technology-enabled, and reform-driven settlement for public services. Unlike recent cases, this SR will take place outside of the fiscal event process and will not coincide with an OBR forecast or a Budget.

On the day, we expect three years of plans for department-level day-to-day spending (covering 2026–27, 2027–28 and 2028–29) and four years of plans for investment spending (extending to 2029–30) to be set out in detail. There was also a zero-based approach to budgeting, with a ruthless assessment of value for money and an aim to 'clear out the dead wood'.

Departments including the Department for Health and Social Care (responsible for the NHS), and Ministry of Defence are rumoured to receive significant funding. The government also looks to boost capital spend and reduce day-to-day spend. Previous fiscal rules have freed up more than £100 billion in capital spend (longer-term projects) but there will be a tight squeeze on day-to-day spending.

But whether it's DHSC or MoD, tech has a significant role to play. Digital technology can help make public services more efficient, effective and user-friendly to improve lives. AI and automation are reducing waiting times for the NHS, where GP practices trialling AI-powered triaging systems have been able to achieve as much as a 73% reduction in patient waiting times for appointments and the DVLA's plans to use automation to reduce wait times for licenses will free up the existing backlog.

Is growth still on the cards?

The UK Government is operating in a difficult environment, and economic and geopolitical headwinds continue to bite. Deloitte’s latest CFO survey showed risk appetite among CFOs has declined in the first quarter, with just 12% reporting that now is a good time to take greater risk onto their balance sheet. This was mainly due to tariffs, sanctions and restrictions to market access.

The IMF also recently downgraded its expectations for this year and next from a forecast made in March, pushing down UK growth from 1.4% to 1.3% in 2025 and from 1.2% to 1% next year.

But growth is still the word and the domestic agenda for this government has been busy and a series of actions have signified steps to make change and guide growth:

So the pressure is on for this Spending Review, and framework of the modern Industrial Strategy, to cut through the noise and support government departments with allocated spending portfolios that can deliver for, and with, the tech sector.

Our call for the government?

The government's SR settlement must ensure that the foundations are in place (skills, tax, infrastructure) to support the adoption, diffusion and scaling of digital tech across the whole economy. Budget allocation and investments should focus on key infrastructure and innovative technologies that define the future and bolster the UK’s competitive advantage in already growing markets (including AI, quantum, semiconductors, future connectivity). Along with delivering on the vision of modern public services to support this.

techUK continue to call for setting a more ambitious target for R&D spending by 2030 (note, this insight was written ahead of the government's announcement on an R&D funding package) and steps to secure the commericalisation of cutting-edge research in the UK. This will help form the next generation of UK unicorns.

In short, any government that is serious about economic growth should prioritise capital spending in science, innovation and technology.

But achieving growth will only be possible in partnership with the tech sector. The Industrial Strategy green paper and AI Opportunities Action Plan recognised this. Industry has the deep expertise, use-cases and risk appetite to guide what will, and can, work.

techUK, on behalf of our members, also stand ready to support this - whether to back the UK’s high-growth firms at the forefront of cutting-edge innovation via our Scale-Up Action Plan, pursue global leadership in semiconductor industry via our UK Plan for Chips or to harness smart, principles-based regulation via our Pro-Growth Digital Regulation paper.

As we look back on this decade, it should be remembered as a time of bold action for tech2035.

For more on the Spending Review and Industrial Strategy, visit our Hub. Recap on techUK's SR submission here.

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techUK helps our members understand, engage and influence the development of digital and tech policy in the UK and beyond. We support our members to understand some of the most complex and thorny policy questions that confront our sector. Visit the programme page here.