Peter Arnold, EY UK Chief Economist, comments on the economic implications of the Chancellor’s Autumn Budget:
“Pre-Budget speculation around the need for up to £40bn of tax rises proved slightly off the mark. Although the Office for Budget Responsibility (OBR) downgraded its growth forecast for the UK economy post-2026, stronger nominal wage growth is expected to lead to a more tax-rich economy than previously expected, even before the announced revenue-raising measures. The Chancellor was therefore able to increase taxes by a more modest £26bn, with freezes to income tax thresholds doing much of the heavy lifting – equivalent to about 60% of the total. This has more than doubled the Chancellor’s headroom against her fiscal rules to £22bn, even when combined with an £8bn increase in spending.
“This additional headroom could reassure bond markets on the sustainability of the UK’s finances, which in turn could bring down debt interest payments. Further, a number of measures taken by the Chancellor, particularly in lowering energy prices for domestic and business users, will be disinflationary, reducing inflation by 0.5% in 2026. This could open a pathway to quicker and more substantial rate cuts from the Bank of England.
“However, the profile of the changes in taxation and spending represent a risk, given increasing spending is front-ended, while tax rises are back-ended, which could be challenging to deliver in the lead up to a General Election. The Chancellor will also likely be disappointed that the OBR did not include any positive adjustments to its forecasts from the trade deals with India and the EU, nor from any of the Budget’s pro-growth measures such as the Youth Guarantee, the Growth and Skills Levy and wider skills and employment support packages, which together are worth around £1.5bn across the Spending Review period.”
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Commenting on the UK Autumn Budget 2025, EY Northern Ireland Managing Partner Rob Heron said,
“As was expected, the Chancellor announced a broad package of measures aimed at raising revenue and also made a number of announcements aimed at increasing productivity, investing in key infrastructure and building business and investor confidence, all critical components for economic growth. Holding business tax rates steady across the UK provides welcome certainty and allows NI businesses to focus on job creation and growth.
For Northern Ireland, the £370m in additional funding for the Northern Ireland Executive is welcome and in particular the £235m to transform NI’s public services. There was an additional £16.6m to boost trade between Northern Ireland and Great Britain, creating a ‘one stop shop’ to support businesses to fully take advantage of their unique access to UK, Island of Ireland and EU markets.
While there has not been significant adjustment around business and entrepreneurial taxation, the announcement of a Call for Evidence offers a unique opportunity for existing and future tax measures and incentives to be shaped by the entrepreneurs and scaling businesses, who are the lifeblood of the NI economy, most directly impacted.”
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