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    27 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    February retail data partially corrects January’s surge

    • UK retail sales volumes declined in February, as January's outperformance partially unwound. The weaker reading was broad-based, driven by a fall in spending across all the major sub-store sectors. Nevertheless, we still think there's room for further softness in the near term.
    • The outbreak of the conflict in the Middle East and the subsequent rise in oil and gas prices mean the retailing outlook has deteriorated since last month. Lower real household incomes and weaker consumer sentiment mean consumer spending growth is now expected to remain relatively subdued this year.

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Retail sales fell 0.4% month-on-month in February, reversing some of January's substantial 2% gain (revised up from 1.8%). A fall in sales volumes was always likely given January's erratically large rise in non-food sales. Last month's increase was hard to view as anything but noise with some of it the result of very strong auctions of items such as artwork and antiques while food and non-store sector sales were also surprisingly strong. Therefore, it comes as no surprise that all the major sub-categories reported slight month-on-month sales declines in February.

    “A larger fall in sales in February had initially appeared likely given the scale and drivers of January's significant increase, particularly following the upward revision made to last month's outturn. We think there's scope for further softness in the near term.

    “Today's data release predates the outbreak of the conflict in the Middle East, which has further worsened the outlook for the retail sector. Real household income growth was already slowing due to weaker pay growth and rising joblessness. However, the recent rise in oil and gas prices means higher inflation will now add to the squeeze. Meanwhile, there are also early signs that the fallout from the conflict has hindered consumer sentiment, which could further prompt households to delay some spending decisions. Overall, we expect consumer spending growth to remain subdued this year.”

    25 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    Inflation was flat in February, but a sharp rise looms

    • Stronger clothing inflation kept UK Consumer Price Index (CPI) inflation steady in February, despite downward pressures from weaker food and fuel price inflation. But higher energy and fuel costs resulting from the Middle East conflict, as well as the impact these pressures will have on other prices, mean we expect inflation to rise sharply in the coming months. CPI inflation is likely to top 4% in the second half of 2026.
    • Given today's data predates the conflict, it will have few implications for the Monetary Policy Committee (MPC). We expect the MPC to keep Bank Rate at its current restrictive level until inflation has returned to target and it is certain that inflation expectations remain well-anchored. However, rate rises are possible if the MPC sees evidence of higher inflation feeding through to higher pay settlements.

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “CPI inflation held steady at 3% in February. The main source of upward pressure came from an unwinding of last year's unusually weak outturn in the clothing sub-category. Offsetting pressure came from weaker food price inflation, while there was also a 1.1% month-on-month fall in petrol prices between January and February, compared to a 1.5% increase between those months last year. Meanwhile, services inflation also edged slightly lower.

    “Rising inflation in the coming months is all but guaranteed as the impact of the Middle East conflict feeds through. High-frequency data suggests petrol prices have already increased sharply over the past few weeks in response to higher oil prices. Domestic energy bills are also set to rise substantially in July, when the next change in the energy price cap comes into force. Higher oil and gas prices will also put upward pressure on the prices of other goods and services, particularly those that are more energy-intensive. We expect headline inflation to top 4% in the second half of 2026, before these increases unwind over the course of 2027.

    “Today's data preceded the outbreak of the conflict, so it will have little bearing on upcoming interest rate decisions. The MPC is seeking to guard against the risk that bouts of high price rises de-anchor inflation expectations. With the growth outlook weak, unemployment high and rising, and policy already restrictive, we think a prolonged hold for Bank Rate is the most likely outcome.”

    24 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    March PMI shows sharp slowdown in activity growth as geopolitics impacts sentiment

    • The conflict in the Middle East will weigh on the UK's growth outlook, with March's flash Purchasing Managers’ Index (PMI) already showing the first signs of the impact on business sentiment. Squeezed real incomes, supply side disruption and tighter financial conditions will all prove headwinds to growth over the coming year.
    • Businesses are already reporting a sharp rise in input prices, justifying the Monetary Policy Committee's (MPC) shift to a ‘wait and see’ approach to setting interest rates at its March meeting. With disruption expected to be prolonged, a sustained hold in Bank Rate appears likely.

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “March's flash S&P Global PMI survey reported a sharp slowdown in activity growth as the UK economy started to feel the initial effects of the Middle East conflict. The composite PMI fell back to 51.0, down from 53.7 in February. Activity was impacted in both the manufacturing and services sectors as price pressures increased, supply chains were disrupted, and financial conditions tightened.

    “The conflict in the Middle East has certainly slowed the UK’s growth outlook for this year, but the extent of the slowdown will largely be determined by the duration of the disruption. The rise in oil and gas prices will squeeze households' spending power, particularly in the second half of the year when the Ofgem energy price cap will be adjusted to reflect the recent rise in wholesale prices. Renewed uncertainty, elevated input costs, and higher borrowing costs will likely see companies put some investment plans on hold. 

    “Signs that the rise in energy prices is already feeding through to prices on the shelves will have caught the MPC’s eye, with manufacturers reporting a sharp rise in input costs. At its March meeting, the MPC shifted into ‘wait and see’ mode, as elevated energy prices and disruption to global supply chains left a big question mark hovering over the inflation outlook. We now think the MPC will keep Bank Rate on hold for an extended period of time until it's sure that inflation expectations remain well-anchored.”

    20 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    Current deficit may miss forecast for 2025-2026 - EY ITEM Club comments

    • While the UK Government looks like it will overshoot this year's current budget deficit forecast, the ongoing conflict in the Middle East could have a greater bearing on the public finances over the medium-term. 
    • The Chancellor left a healthy margin for error against her fiscal rules, so there is a buffer in place to absorb unexpected economic shocks. But previous Office for Budget Responsibility (OBR) analysis shows that the oil price rise and disruption to key shipping lanes could push up borrowing. 

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “The Government borrowed £5.1bn in February to cover everyday spending, which is broadly comparable to last year, but probably more significant than the OBR pencilled into its Spring Forecast update. The OBR is yet to publish a monthly forecast consistent with its new projections. 

    “With only one month of the 2025-2026 fiscal year remaining, it looks very likely that the current budget deficit will run ahead of the OBR's forecast from earlier this month. Across the eleven months to February, the current budget was in deficit by £62.1bn, already outstripping the £49.2bn expected for the fiscal year as a whole. The current budget has tended to be in surplus in March, but it's still likely that the overall current deficit is wider than the OBR expected.

    “Looking ahead, a prolonged conflict in the Middle East could have more significant consequences for the public finances. The OBR's Spring Forecast estimated that the Chancellor would meet her fiscal rules by a healthy margin, but some of this could be used up if energy prices remain elevated for a lengthy period. Scenario analysis published by the OBR in 2024 indicated that a conflict in the Middle East that disrupts supply chains would increase day-to-day borrowing as increased interest and welfare payments would outweigh the impact of any additional tax revenues raised.”

    19 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    EY ITEM Club comments: MPC back in ‘wait and see’ mode

    • MPC back in ‘wait and see’ mode - EY ITEM Club comments
    • The conflict in the Middle East has shifted a Committee that was willing to cut rates further firmly back into ‘wait and see’ mode. While the Monetary Policy Committee (MPC) will not commit to making the next move in interest rates a cut, the bar for a hike remains high.

    A struggling jobs market, alongside beliefs that rates are restrictive and pricing power is weak, will likely leave the MPC thinking that keeping rates unchanged will be sufficient to eventually get the disinflation process back on track. 

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Today’s decision to keep Bank Rate unchanged at 3.75% came as no surprise as the MPC waits to see how the conflict in the Middle East develops and the implications for inflation and the wider domestic economy. 

    “The MPC dropped its long-held easing bias in response to the recent rise in energy prices. Across what had previously been a divided Committee, it’s clear that there is now more of a worry that rising household energy and petrol bills, alongside higher production costs, could cause some stickiness in inflation. But the Committee’s acknowledgement that it faces a tricky dilemma given the recent deterioration in the jobs market suggests that inflation may not be its only focus when setting interest rates over the coming months.  

    “While it’s clear that the MPC will want to see signs that disinflation is still on track before cutting interest rates further, we think its promise “to stand ready as necessary” to keep a lid on inflation should be viewed as tough talk rather than a strong willingness to hike. Indeed, the discussion at the meeting still points to a very high bar for interest rate rises in our view. The suggestion that rates are already restrictive and that the current pricing environment is weaker than in the previous inflation surge of 2022 and 2023 points to a preference to keep interest rates unchanged for as long as required, hiking only if there were clear signs that inflation is expected to drift materially higher.”

    19 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    EY ITEM Club comments: Some signs the job market’s slide is slowing

    • The UK labour market data will not play a major role in the Monetary Policy Committee's (MPC) decision later today. It seems a near certainty that Bank Rate will be left unchanged as the MPC waits to see if the recent rise in energy prices is sustained.
    • But tentative signs that the job market's deterioration is easing will be welcomed by dovish MPC members, while a continued slowing in pay growth will be well-received by the hawks.

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Pay growth cooled further in January, with headline private sector regular pay growth edging down to 3.3%. The slowdown at the start of the year looks sustainable, with momentum in pay growth remaining relatively modest. Earnings over the last three months grew at an annualised rate of 2.8%, below the 3.25% level the Bank of England considers consistent with inflation settling at the 2% target. 

    “The labour market has loosened a lot over the last year or so, but there are few signs of a further deterioration in today's data. The unemployment rate – which has been affected by data quality issues – remained unchanged at 5.2% across the three months to January. Headcount measures based on more reliable tax data suggested employment increased by 20,000 in February, while January's estimate was revised to a pickup of 6,000. However, it appears too soon to say the labour market is bottoming out, with previous improvements in headcount data having proved short-lived. 

    “The uncertainty around the severity and duration of the recent rise in energy prices will likely pressure the MPC to hold Bank Rate later today. The Committee will want to make sure that a surge in energy prices will not threaten the progress that's been made on disinflation before cutting rates further. But some signs that the deterioration in the job market's prospects have eased will make it a slightly more comfortable wait for most of the Committee. While the bar for raising Bank Rate remains very high in our view, a prolonged conflict in the Middle East could see rates remain on hold until next year.”

    13 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    GDP was flat in January, and underlying conditions look soft

    • UK GDP was flat in January, with modest offsetting swings in output across a number of sectors. We still think output growth will be faster in Q1 2026 than in the second half of 2025, given the solid launch pad from positive outturns at the end of last year and further evidence of residual seasonality.
    • However, 2026 will likely be another soft year for GDP growth. Higher inflation resulting from the Middle East conflict will intensify the slowdown in real household income growth, and prospects for business investment and exports appear similarly downbeat.

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “After consecutive month-on-month expansions in late 2025, the economy flatlined in January. At the sector level, the story was largely one of previous anomalies unwinding. On the upside, distribution output rose sharply in January, broadly in line with the month's increase in retail sales. Meanwhile, health output rebounded modestly, as the drag from resident doctor strikes in December faded. This was offset by output dropping back in some non-consumer-facing parts of the services sector after December spikes, and weaker industrial output.

    “Nevertheless, Q1 2026 should see stronger GDP growth than the second half of 2025. Solid activity growth in November and December provided a very supportive launchpad for quarterly growth in Q1, and the monthly pattern is indicative of residual seasonality, with recent years recording stronger readings in the first quarter that are followed by an abrupt slowdown.

    “The picture for activity in 2026 as a whole is weaker. The momentum behind real household income growth was already cooling, but higher inflation due to the conflict in the Middle East will exacerbate the slowdown. Weak profitability and low business confidence are likely to restrain business investment, and prospects for UK exports appear similarly downbeat. In the March update, the EY ITEM Club cut our already below-consensus forecast for 2026 GDP growth, and even that projection would prove too strong if oil and gas prices rise further.”

    12 March 2026 | EY ITEM Club comments | Media contact: James White - Senior Executive, Media Relations, Ernst & Young LLP

    Geopolitical disruption set to delay March cut

    • The conflict in the Middle East will give the Monetary Policy Committee (MPC) pause for thought as it is likely to leave interest rates unchanged at its March meeting. 
    • Rises in energy prices will rekindle concerns around sticky inflation for most rate setters, making worries about a deteriorating jobs market less of a priority.
    • With significant uncertainty around how the conflict will play out, it’s unlikely that the Committee will provide any detailed guidance on the future path of interest rates this month.

    Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “At its February meeting, the majority of the MPC indicated that its worries were shifting away from sticky inflation and towards a deteriorating jobs market, putting the possibility of a cut at its March meeting firmly on the table. Data since the last meeting has been on the hawkish side, but the escalation of the conflict in the Middle East will likely have caused the MPC to dramatically shift its risk calculus. A cut at the March meeting would now come as a big surprise.

    “The conflict in the Middle East means that sticky inflation is expected to once again become the MPC’s central concern. The sharp rise seen in oil and natural gas prices will, if sustained, push up materially on inflation through the middle of this year as petrol prices and household energy bills rise.

    “The MPC’s pre-pandemic approach would suggest that the Committee could disregard the effects of changing energy prices and continue to support an ailing jobs market. However, this appears unlikely, with rate setters now expected to be far more cautious. Faced with the possibility of materially higher inflation than previously thought, most MPC members will likely prefer to keep rates unchanged as they wait for more clarity on how the geopolitical situation will play out. 

    “The MPC is likely to offer little guidance on where it expects interest rates to head going forward. The Committee is instead expected to reinforce that it will continue to balance the risk of sticky inflation with the prospect of a modest jobs market as it sets interest rates with the aim of meeting the Bank of England’s inflation target.”

    27 Nov 2025 | EY comments - Autumn Budget 2025

    Budget 2025: EY comments on electric vehicles following the Autumn Budget

    Maria Bengtsson, EY UK&I Mobility Leader, comments on electric vehicles following the Chancellor’s Autumn Budget: “While it’s positive that the rate of tax per mile for EV drivers will remain significantly lower than the effective rate for petrol and diesel drivers, this still represents a new additional cost for EV owners, and therefore a potential barrier to demand. That said, the additional £1.3bn of funding towards the Electric Car Grant should help offset some of the downside impact, making the EV transition more affordable for more households.

    “The announcement of £200m in further funding towards the rollout of EV chargers across the country, as well as a 100% business relief rate for businesses with EV charging points are also encouraging steps to support the UK’s EV transition. The threshold for the expensive car supplement rising to £50,000 for electric vehicles, up from £40,000, may also make EVs more attractive to buy.

    “Further announcements in relation to the automotive sector included a delay to the expected changes to employee car ownership schemes. These changes will now be implemented in 2030, with a two-year transition period. Details are still to be confirmed, but this delay will be positive news for many auto manufacturers and dealers who often use these schemes to help support demand for ‘nearly new’ used cars.”   

    Media contacts:

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    27 Nov 2025 | EY comments - Autumn Budget 2025

    Mike Grayton, EY Partner comments on the impact of the Budget on the Consumer Products and Life Sciences sector:

    Consumer Products:

    “Changes to the Soft Drinks Industry Levy may increase reformulation costs for some in the sector which could lead to price increases for consumers already facing higher costs and reduced spending power. The proposed tiered business rates system will benefit smaller businesses, although high-value properties will be more adversely impacted which could lead to pricing pressure. One area of optimism is the reference to increased R&D funding in coming years, and the potential for increased support for energy costs for manufacturing activities.”

    Life Sciences sector:

    “Support for advanced assurance on small and medium-sized R&D claims, along with previously announced initiatives under the Industrial Strategy, including the Life Sciences Innovative Manufacturing Fund, and the Global Talent Visa programme will be welcome news to the life sciences sector, however, many businesses will have been hoping for more. Rising costs from business rates on high value properties and increased employment expenses will increase costs and some in the sector will have been hoping more targeted measures to support companies.”    

    Media contacts:

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Budget 2025: EY comments on Business Rate Multipliers following the Autumn Budget

    Russell Gardner, EY UK Head of Real Estate, Hospitality and Construction, comments on Business Rate Multipliers: “The Budget included a series of adjustments that will affect the real estate market to varying degrees. Commitments to increase planning officer recruitment should help to accelerate decisions at a local level and move projects from concept to construction more quickly, while the release of the new Business Rate Multipliers will have the greatest near-term impact on the UK property market. 

    "Business rate reform had been mooted as a way to shift the tax burden away from bricks and mortar retail, hospitality and leisure businesses and towards ecommerce logistics hubs and data centres, levelling the playing field between the high street and digital companies. While wholesale reform remains on the horizon, these new multipliers will mean that properties with a rateable value of more than £500,000 will carry a greater proportion of the rates burden, with office and industrial properties in London and the South East expected to bear the brunt of these higher costs.  

    “However, until the updated rateable values have been released, it remains unclear how much of the burden will shift towards those 21,000 commercial properties across the UK thought to have a rateable value of above £500,000.  With the OBR indicating that the 2025/26 tax take from business rates is set to rise by 5% on the year before, the Government may prefer to bank the increased tax receipts before making more radical changes.”   

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Budget 2025: EY comments on the changes to VAT treatment of charitable donations at the Autumn Budget

    Carolyn Norfolk, Indirect Tax Partner at EY, comments on the changes to VAT treatment of charitable donations announced at the Chancellor’s Autumn Budget: “Following a consultation earlier this year, the Government has confirmed that it will remove the charge to VAT where businesses make charitable donations, removing a significant barrier to companies seeking to donate goods. Previously, it could be more cost effective to scrap goods rather than donate them.  

    "Addressing this anomaly will not only help with the cost-of-living crisis but also support the environmental agenda by reducing wastage. To further the Government’s digital inclusion aims, there is a higher limit for digital assets. However, the relief does not extend to community interest companies (CICs) and social enterprises, a gap that could benefit from being plugged in future.”   

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Katie Selvey-Clinton, Capital Allowances Tax Partner at EY, comments on changes to capital allowances announced in the Chancellor’s Autumn Budget:

    “One of the Budget’s largest revenue-raising business measures is the reduction in the capital allowances rate on plant and machinery, forecast to generate £7bn in cash flow over the next five years. Whilst most new assets benefit from generous 100% full expensing allowances, this new measure erodes the tax relief available for older assets and second-hand purchases, which are specifically excluded.

    “Limiting incentives to new assets restricts the relevance for second hand transactional markets such as infrastructure and real estate, and doesn’t reflect the desire to reuse and recycle. The new 14% rate means it will now take over 16 years before the asset is fully written off.”  

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Chris Taylor, EY Indirect Tax Transformation Partner and E-invoicing Lead, comments on e-invoicing measures announced in the Chancellor’s Autumn Budget:

    “The announcement on e-invoicing in today’s Budget, requiring all VAT invoices to be issued in a specified electronic format from April 2029, is a significant step forward and provides certainty for businesses in terms of timeframe. It also aligns the UK with a number of other markets across Europe who are going live with e-invoicing legislation in 2026.

    “The Government has explicitly recognised the important role e-invoicing will play in supporting HMRC’s digitalisation goals over the coming years, as well as its ability to reduce the VAT gap.  The announcement follows an initial consultation earlier this year and shows that HMRC is continuing to see the progress and benefits of e-invoicing in other major economic markets.  Whilst not meeting Malaysia’s implementation record of two years, HMRC’s timelines align to those of other major markets who typically move from initial consultation to formal legislation in between three and five years.

    “An implementation roadmap is expected to be published at Budget 2026 and businesses will need to be ready to engage to ensure that there is as little disruption as possible.”

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Andrew Ogram, Energy Tax Partner at EY, comments on energy measures announced in the Chancellor’s Autumn Budget:

    “This Budget’s energy measures shift more of the costs to decarbonise the economy from energy bills onto general taxation while layering in new, targeted charges.

    “Moving some levies off electricity bills and expanding the Warm Home Discount to all households on means-tested benefits will be felt most directly by low-income consumers and by electricity-intensive businesses that benefit from slightly lower unit power costs. General taxpayers will increasingly underwrite policy costs that were previously recovered through tariffs, while the Sizewell C Regulated Asset Base Levy and other charges mean that part of the cost to decarbonise will still be visible on electricity bills, particularly for larger commercial users.

    “For investors, changes to the structure of certain levies should deliver more bankable long-term cash flows for new nuclear and other low-carbon projects, but concerns will remain about UK industrial power prices and their impact on UK competitiveness relative to peer economies.

    “In the North Sea, the lack of substantive reform to the Energy Profits Levy will disappoint industry hopes for an early withdrawal before March 2030. Following consultation, the Government has announced its intention to introduce what is essentially a tiered royalty when the EPL ends. Overall, the UK remains one of the most complex and uncertain upstream tax regimes among mature basins.

    “Taken together, the package nudges the UK towards cheaper low-carbon electricity but highlights the trade-offs between lower bills in the short-term, the need to raise revenue in the long-term and the stability of the investment environment for both low-carbon and conventional energy projects.”

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Budget 2025: EY comments on the industrial impact of the Autumn Budget

    “This Budget’s energy measures shift more of the costs to decarbonise the economy from energy bills onto general taxation while layering in new, targeted charges.

    Mark Minihane, UK&I Industrials and Energy Tax Leader for EY, comments on the industrial implications of the Chancellor’s Autumn Budget: “Renewed support for decarbonisation, renewable energy projects, grid upgrades and digital infrastructure will have been on the Budget wish lists of many industrials and energy businesses. Industry groups have called for measures to lower energy costs, expand competitiveness schemes and introduce targeted incentives for electrification and clean energy investment. While today’s announcements present opportunities for businesses investing in efficiency, sustainability, and advanced technologies, there remain rising costs and regulatory risks for energy-intensive or carbon-heavy operations. 
     
    “When it comes to modernising UK industry and accelerating the transition to net zero, stability and clarity around reliefs will be crucial to giving companies the confidence to commit to long-term capital projects. On this front, collaborative research and development (R&D) cash grants of up to £20-50m depending on project size and scope, and the pledge of an additional £1.5bn to extend the DRIVE35 programme to back the automotive sector, will provide crucial support. However, UK industry continues to navigate complex challenges and may require further targeted measures to build on these advances.”

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Chris Sanger, UK Tax Policy Leader at EY, comments on measures announced in the Chancellor’s Autumn Budget:

    “The Chancellor delivered on the speculation of a “smorgasbord” of measures, with 44 tax measures raising a net £26.6bn per annum by 2030-31. The benefit of a smorgasbord is that the diner can choose their dishes, but the Budget was more of a stew, serving up all the measures together in one meal.

    “The ‘meat’ of the Budget was the threshold freezes, the increase in employment and savings taxes, the new council tax surcharge and the mileage charge on EVs. In terms of sweeteners, there was the usual freeze in fuel duty and an extension of the Enterprise Management Incentives. More neutral were the changes to allowances for capital investment by businesses, with a new first year allowance but reductions in allowances for the subsequent years.

    “Overall, the Chancellor delivered a Budget that raised less in taxes than last year and maintained the Government’s manifesto commitments, making it as palatable as could be expected for a revenue raising Budget. The Treasury Red Book ran to 146 pages but, with the Finance Bill due out next week, there is plenty of detail still to come.”

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Budget 2025: EY comments on the economic impact of the Autumn Budget

    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.” 

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Sarah Farrow, UK Private Client Services Partner at EY, said:

    “Today the Chancellor chose to increase the tax on savings, both through two percentage point increases in the tax rates on property, savings and dividends, and restricting relief for cash ISAs. Given the exemptions for small amounts of saving income, this may fit with raising taxes from those with the broadest shoulders, but could act as a further deterrent for passive investment.

    “Beyond the £2.3bn hit on savings, the Chancellor also restricted NICs relief for salary sacrifice pension contributions and froze Income Tax thresholds, netting £15bn combined. These changes will begin to impact people’s pay packets from 2029, perhaps leading to the disinflation that the Chancellor was looking for.

    “The Government has reiterated its ambitions to make the UK more attractive for entrepreneurs, skilled professionals and investors. These individuals will have been anticipating today’s Budget with keen interest and, with measures now unveiled, transparency and stability, coupled with a clear focus on growth, will remain essential in enabling them to plan ahead and support future investment decisions. This will also ensure the UK continues to attract and retain investors, founders and entrepreneurs.”

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Laura Mair, EY UK&I Managing Partner for Tax and Law, comments on changes for business announced in the Chancellor’s Autumn Budget: 

    "The Chancellor announced a package of measures aimed at raising revenue but also driving up productivity, investing in key infrastructure and building business and investor confidence, all critical components for economic growth. Holding business tax rates steady provides welcomed certainty and allows businesses to focus on job creation and growth. 

    "Many companies will likely feel relief that this Budget avoided mirroring the raft of business taxes announced last Autumn, with much of the focus instead on revenue-raising measures targeted at individuals and some targeted adjustments for companies.  Cutting low-value import relief should provide a competitive advantage to the UK high street, while proposals to reduce energy bills could offer valuable support to eligible firms in high-growth sectors like automotive and aerospace. Although the restriction of NICs relief for pension contributions given under salary sacrifice and the reduction in the main rate of capital allowances will add to company costs over time, and personal taxes may present challenges for consumer-facing sectors reliant on discretionary spending, this was a relatively quiet Budget for business.  

    "Nevertheless, businesses continue to shoulder a substantial amount of the UK's overall tax take and face elevated labour costs. Delivering on the Government's priority growth mission will clearly require further measures designed to support business activity and investment, particularly across key sectors identified in the Industrial Strategy. EY data shows that the UK remains one of Europe's leading destinations for inward investment in high-growth sectors like financial services, digital technology and life sciences. Businesses will be hoping that the last two Budgets provide sufficient fiscal headroom to fuel future incentives aimed at attracting more capital into these strategically important industries."

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    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Rob Joyce - Senior Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Paul Kitson, EY Pensions Consulting Leader said:

    “The Chancellor’s decision to place a £2,000 cap on salary sacrifice pension contributions from 2029 is another material cost to businesses, who were already hit by the increase in employer National Insurance introduced earlier this year. Significantly, this decision will also likely impact workers, effectively reducing the value of their pension pots, when worries around having adequate funds for retirement are already high.

    “While fiscal challenges may need to be addressed and the Chancellor has steered clear of more significant limits (e.g. removing the NI exemption entirely), this is still a challenging policy change for businesses. While the change won’t come into effect until 2029, in practice, it may be difficult to administer, and significant time will need to be spent by businesses working out the operations, which may counteract the benefit the Treasury hopes to achieve. The measure could also have longer-term implications, by risking the attractiveness of pension savings at a time when this should be being actively encouraged.”

    Media contacts

    Victoria Luttig - Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    James Guthrie, EY Financial Services Tax Partner, comments on ISA reform announced in the Chancellor’s Autumn Budget:

    “The Chancellor’s decision to reduce the annual allowance in Cash ISAs from £20,000 to £12,000 for under 65s has been prompted, at least in part, by a desire to encourage greater flows of investment from cash into higher-growth investments like stocks and shares to ultimately boost the UK stock market and economy and drive greater returns for savers. This will likely bring a mixed reaction from individuals and businesses.

    “While promoting informed investment decisions and supporting UK businesses is a plus, a consumer shift into stock market investment is certainly not automatic. Demand for cash ISAs has been rising, as more risk-averse savers and those with short-term plans for their savings, for example for property, often see them as a safe home for their money. These individuals may not want to switch a sizeable portion of their funds into stock market shares. Ultimately, this move could result in people saving less.

    “Equally, for banks who leverage cash ISAs as funds for household and business loans, this decision could create challenges, potentially leading to higher interest rates, stricter lending criteria and reduced access to capital for firms.”

    Media contacts

    Victoria Luttig - Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Andrew Pilgrim, EY UK Government and Financial Services Leader, comments:

    Chancellor announced a package of measures which aim to drive business and investor confidence, and UK economic growth. There had previously been some talk around potential changes to the banking tax rates, however the decision to hold these steady provides welcome clarity and certainty.

    “While UK banks will continue to pay a higher tax contribution compared to other sectors and indeed other nations, the lack of increase is a small but reassuring sign that the Government is listening to the concerns of the sector. With the Budget now behind us, UK banking and wider financial services leaders will look to continue working effectively with Government to drive forward efforts to embrace emerging technologies, support job creation and ultimately ensure the UK remains a globally competitive place for financial firms to invest and do business.”

    Media contacts

    Victoria Luttig - Manager, Media Relations, Ernst & Young LLP

    26 Nov 2025 | EY comments - Autumn Budget 2025

    Silvia Rindone, EY UK&I Retail Lead, comments on retail sector measures announced in today’s Autumn Statement

    "Today’s Budget announcement introduced measures that will impact the retail landscape and influence consumer behaviour for years to come. The proposed tiered business rates system offers welcome relief for smaller retailers, helping to ease cost pressures at a time when margins are tight. However, the additional burden placed on larger operators could lead to more expensive food bills for consumers – further challenging high street vitality and consumer choice. 

    “Consumer confidence has deteriorated sharply in the last 12 months, and persistent inflationary pressures and rising living costs mean sentiment has remained fragile.  

    “Closing the import duty loophole for small parcels is a positive step towards fairer competition, but it could also push up online prices, prompting consumers to reassess buying habits. For premium retailers, concerns will centre on whether higher taxes erode the spending power of their core customer base. 

    “While some measures will level the playing field for domestic retailers, the cumulative effect of tax changes and cost adjustments could temper spending, particularly in non-essential categories. Retailers will need to adapt quickly, prioritising value-driven propositions and omnichannel strategies to maintain engagement in an environment where affordability and trust will drive purchasing decisions.”

    Media contacts

    Justin Moll - Manager, Media Relations, Ernst & Young LLP 
    Chris Brown - Manager, Media Relations, Ernst & Young LLP

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