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

A good start to the year for the housing market, but challenges lie ahead

  • Although the early data for 2026 shows the housing market has gained momentum, affordability challenges will persist, and this is likely to be another year of modest house price growth. If sustained, the recent conflict in the Middle East could cause interest rates to remain higher for longer and pose a challenge to the housing market.
  • Following disruption to oil and gas supplies, financial markets are expecting higher inflation and slower interest rate cuts. With banks using these instruments to price mortgages, lending rates could rise if current financial market pricing persists.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “House prices picked up by 0.3% in February, building on January’s rise of 0.8%. Over the last couple of months, house prices have gained momentum having fallen back towards the end of last year. However, looking past some of the month-to-month changes in the data, the track record remains modest with house prices 1.3% higher than in February last year. 

 “The recent developments in the Middle East could pose a challenge to the housing market if the conflict is prolonged. The sharp rise in oil and, particularly, gas prices has caused financial markets to reassess the speed and extent to which the Monetary Policy Committee (MPC) will likely lower interest rates. Consequently, swap rates have risen, and this can be expected to feed through to higher interest rates on new mortgages, if sustained. 

 “It appears that the recent substantial improvements in housing affordability are a thing of the past. Pay growth is slowing while it looks like there will be little scope for a material fall in mortgage interest rates, and housing valuations remain stretched. All told, this year is likely to see modest housing market growth, but the longer oil and gas markets are affected by the current geopolitical disruption, the greater the risk of more material headwinds in the housing market.” 

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

A cloud of uncertainty hangs over the construction PMI

  • The construction sector clearly faces several challenges, but the recent Purchasing Managers’ Index (PMI) readings appear too pessimistic about the sector’s activity. Conflict in the Middle East is likely to further disrupt the PMIs as corporate sentiment deteriorates against a backdrop of heightened geopolitical uncertainty. 
  • The construction sector faces an uncertain outlook over the next twelve months. Planning reforms and new public infrastructure projects might offer some bright spots, but ongoing economic uncertainty and the possibility of disruption to energy markets will, if sustained, weigh on the sector’s prospects. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “The February construction PMI continued to point to a sector that is facing a challenging landscape, with the balance slipping further into contractionary territory. Having reached a seven-month high of 46.4 in January, the PMI dipped to 44.5 in February as activity across residential and commercial construction fell. Businesses responding to the survey reported sluggish demand behind the slowdown, although some companies were optimistic that the downturn would be short-lived, attributing much of it to the recent wet weather. 

“In recent times, the PMI has provided a much too pessimistic reading on construction sector activity. This might worsen over the next few months, with corporate caution likely to rise as companies wait to see how the conflict in the Middle East progresses and monitor the implications for the price and availability of energy and other raw materials. The PMI could deteriorate further over the next few months if the conflict proves prolonged. 

“Over the rest of 2026, the construction sector is likely to face mixed fortunes. Planning reforms and new public infrastructure spending will offer a boost to incoming new work. However, the recent events in the Middle East will be a source of disruption. It’s possible some large projects could be delayed or cancelled as businesses wait to see how the situation develops, while disruption to energy markets and supply chains could make some construction projects more expensive or difficult to complete.” 

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

Middle East disruption likely to halt run of strong PMI readings

  • The UK Purchasing Managers’ Index (PMI) overstates the current momentum in the economy and instead reflects an improvement in business mood, which will likely reverse in upcoming surveys given the conflict in the Middle East. It’s likely that 2026 will be another year of modest GDP growth. 
  • Businesses continue to face elevated input costs and, if sustained, the recent spike in energy prices will only increase this challenge. This will leave the Monetary Policy Committee (MPC) facing a more difficult trade-off between keeping a lid on inflation and supporting a softening labour market. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “February's final services PMI pointed to a second consecutive month of strong growth. The balance of 53.9 was broadly in line with January's five-month high. However, we are sceptical as to whether the sector has really shifted up a gear at the start of the year. Respondents to the survey report a positive mood and the PMI has a track record of responding to shifts in corporate sentiment rather than activity. It would not be surprising to see next month’s survey reflect a marked deterioration in corporate mood in response to the expected impact that the conflict in the Middle East will have on the global economy and financial markets.

“We think there is less momentum in the UK than the recent rise in the PMI would indicate. With real income growth set to slow, fiscal policy tightening, and monetary policy offering limited support, 2026 will likely be another year of modest economic growth. 

“Businesses continued to report rising input costs in February, although they weren't fully reflected in service price changes. The recent rise in oil and gas prices will only add to this burden and will eventually be passed onto the consumer. This will leave the MPC having to balance a trickier trade-off between higher inflation and a deteriorating jobs market. Given the increased uncertainty around the inflation outlook, the chances of a March rate cut are now much lower. However, if disruption in the Middle East proves brief and oil and gas prices fall back, an April rate cut could still be on the table.”

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

Recent rise in Manufacturing PMI is too optimistic

  • The recent rise in the UK manufacturing Purchasing Managers’ Index (PMI) paints an overly optimistic picture of the sector's health, reflecting a shift in business sentiment rather than activity. Global economic uncertainty and tightening fiscal policy will underscore another modest year for the sector. 
  • Elevated cost pressures are being passed through to the prices of goods on shelves, but this is unlikely to move the needle for the Monetary Policy Committee (MPC), which has recently been more focused on the deteriorating jobs market. The MPC still appears likely to cut in Bank Rate in March or April. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “February's final S&P Global Manufacturing survey continued to point to modest activity growth in the sector, with a PMI of 51.7 being broadly in line with the 51.8 recorded in January. February's reading continues the run of stronger results since the turn of the year. However, the PMI has previously shown it fluctuates significantly in response to changes in businesses' mood rather than activity. Geopolitical disruption in the Middle East is increasing global economic uncertainty and the PMI could retrace its recent rise if volatility in the region continues.  

“The manufacturing sector's prospects remain modest over the coming year. An uncertain global economic outlook will likely weigh on external demand, while slowing real income growth and tightening fiscal policy point to subdued domestic demand conditions. 

“Pressure from labour and input costs are forcing businesses to increase the price of goods, but this is unlikely to have much bearing on the MPC’s immediate thinking. At the February meeting, the Committee indicated it was more focused on a deteriorating jobs market and that it was putting less weight on the possibility of sticky inflation in its interest rate decisions. The MPC will likely cut Bank Rate in either March or April.”

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

Mortgage activity remained weak at the start of 2026

  • UK mortgage approvals unexpectedly declined again in January. But the recent weakness in mortgage activity appears inconsistent with other measures of the underlying health of the housing market, so there's a good chance that these falls in approvals unwind in the near term.
  • Net unsecured lending rose modestly following a pickup in gross lending. Although real income growth is slowing, a combination of improving consumer sentiment, some dissaving, and stronger demand for credit should keep consumer spending growth steady this year. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Mortgage activity unexpectedly lost further ground in January after a surprise fall in December. Approvals for new home purchases fell to 59,999 in January, down from 61,007 a month earlier. The weakness in activity over December and January appears inconsistent with other measures of underlying conditions in the housing market, so there's a good chance that recent declines unwind in the near term. Net mortgage lending also fell to £4.1bn, down from £4.5bn in December, due to a pickup in repayments at the start of the year.

“Swap rates have fallen sharply over the past month, after the Monetary Policy Committee’s (MPC) February meeting minutes struck a more dovish tone than was anticipated. This will likely push down quoted mortgage rates, which is expected to support a rebound in mortgage approvals in the coming months. However, there's limited room for swap rates and mortgage rates to fall much further beyond that, so the recovery in approvals will likely start to plateau later this year.

“Net unsecured lending edged up to £1.8bn in January, from £1.7bn in December. The modest rise was driven by an increase in gross lending, which is consistent with the month's strong retail sales outturn. Although real household income growth is cooling sharply, firming confidence should mean consumers save less and take on more credit, keeping growth in consumer spending steady this year.”

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

Decent start to 2026 masks challenges facing the housing market

  • The pickup in house prices over the first couple of months of this year probably paints an overly optimistic picture of the housing market as some of the weakness from the end of 2025 unwinds. Indeed, underlying economic conditions point to 2026 being another modest year of housing market performance.
  • The recent improvements in affordability are now likely in the rear-view mirror as pay growth slows, while it’s unlikely that the Bank of England will lower Bank Rate this year as much as it did in 2025.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “The Nationwide house price index picked up again in February, growing by 0.3% month-on-month. Despite the seemingly strong start to this year, growth over the last twelve months remains modest, with house prices 1% higher compared to February last year. 

“Healthy pay growth and falling interest rates have seen housing affordability improve over the last year or so. In response, there were approximately 10% more housing transactions in 2025 than there were in 2024. However, there was some volatility in housing market activity throughout the year, as stamp duty changes in April pulled some purchases into the first quarter of the year. Without similar policy changes on the horizon, this year’s housing market performance is expected to be more reflective of underlying economic conditions.

“The fairly strong start to this year for house prices probably reflects the unwinding of the unusually soft end to last year, as well as masking some of the challenges likely to face the housing market over the next 12 months. Softer pay growth will mean that the recent improvements in affordability are a thing of the past, while the Monetary Policy Committee (MPC) will likely deliver fewer interest rate cuts this year than it did in 2025. All told, this likely points to another year of modest house price growth in 2026.” 

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

Inflation falls due to base effects and volatile categories

  • Today's UK inflation data showed some signs of stickiness in services prices, so whether the Monetary Policy Committee (MPC) cuts rates in March or April still hangs in the balance.
  • January’s fall in inflation was largely due to a combination of powerful base effects and movements in the volatile categories. Inflation will likely hold steady over the next two months, before falling significantly in April due to smaller regulatory price rises and the impact of measures announced in the Autumn Budget. However, inflation is likely to edge higher again from H2. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Consumer Price Index (CPI) inflation fell to 3% in January, down from 3.4% in December, largely reflecting strong base effects and movements in the volatile categories. January 2025 had seen the imposition of Value Added Tax (VAT) on private school fees, and a strong reading for food prices. Meanwhile, petrol prices fell 2.2% month-on-month between December 2025 and January 2026, but rose 0.8% over the same period a year earlier, and December's unusually strong outturns in the volatile air fares and games and hobbies categories unwound. However, core services inflation, the Bank of England's favoured measure, rose.

“CPI inflation is expected to remain relatively stable over the next two months, before the combined effect of reduced annual regulated price increases, a substantial fall in Ofgem's energy price cap, and the impact of policy measures from the Autumn Budget prompt a marked decline in inflation in April. However, inflation is likely to drift up again from the second half of 2026, with sticky pay growth likely to stop services inflation from softening materially.

“Today's outturn for services inflation was higher than the Bank of England had projected, while measures of underlying services inflation also ticked up. February's meeting minutes suggested that a narrow majority of MPC members are likely to vote to cut Bank Rate again at one of the next two meetings. However, as with the latest labour market release, the inflation data does not offer a clear signal as to whether the next cut will come in March or April.”

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

Labour market data consistent with a rate cut in March or April

  • Strong base effects meant the slowdown in UK private sector regular pay growth continued in December, but there were signs that recent downward momentum might be starting to recede. Labour market conditions loosened further in January, with job vacancies falling and HMRC's count of payrolled employees showing another modest decline.
  • Members of the Monetary Policy Committee (MPC) had suggested they were less concerned than before about the strength of pay growth, with settlements nearing a target-consistent pace amid a renewed focus on weak growth and labour market conditions. Bank Rate will likely be cut at one of the next two meetings, but today's data doesn’t offer a clear steer on March or April. 

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “Today's labour market release reported that private sector regular pay growth – the Bank of England's favoured measure – edged down to a five-year low of 3.4% in the three months to December. However, this was entirely due to base effects, with a stronger outturn for December suggesting that recent downward momentum might be starting to recede. 

“On the quantities side, the picture was one of further weakness. The Labour Force Survey (LFS) data should be taken with a pinch of salt given its ongoing issues with volatile results and low response rate, so we put little weight on the unemployment rate rising to 5.2% in the three months to December. A range of other indicators suggest conditions are continuing to loosen, but more gradually than in recent months. HMRC's count of payrolled employees fell modestly in January, with December's large decline revised smaller. Elsewhere, job vacancies also fell modestly in the three months to January.

“February's meeting minutes suggested that members of the MPC had become less concerned with the strength of pay growth than before, while there was renewed focus on the subdued labour market and growth outlook. While today's pay data was in line with the Bank of England's staff forecast, signs that downward momentum might be easing may encourage a more cautious approach among the more marginal voters. Therefore, while we still think the Committee will cut Bank Rate at one of the next two meetings, the decision around whether the next cut will come in March or April looks finely balanced.” 

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."

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

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.”

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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.”

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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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