Menzies LLP – A leading chartered accountancy firm.
Growth forecast cut dampens outlook
The halving of the OBR’s 2025 growth forecast from 2% to 1% is unwelcome news for manufacturers, signalling a sluggish economic environment ahead. This adds to existing challenges, including rising costs and external threats such as the potential return of Trump-era tariffs on UK exports to the US. Together, these pressures create a difficult backdrop for investment and expansion in the sector.
Tax changes still stand
As anticipated, the government did not reverse key tax measures introduced in the Autumn Budget, including the upcoming NIC increase and the reduction in business relief on inheritance tax. The lack of acknowledgement of their impact is disappointing. These changes affect manufacturers’ ability to reinvest in capital, fund innovation, and plan for sustainable long-term growth—undermining overall sector competitiveness.
Defence spending a targeted opportunity
We welcome the recognition of manufacturing’s contribution to the defence sector, with the commitment to spend 2.5% of GDP on defence by 2027 and a £2.2bn funding boost for the Ministry of Defence. These measures offer growth potential for manufacturers already embedded in defence supply chains, providing a rare opportunity to outperform broader economic conditions through increased demand and project pipelines.
Limited access for new entrants
However, these defence-related opportunities are unlikely to be easily accessible to new market entrants. The specialised nature of the sector, coupled with complex compliance and procurement requirements, will limit the impact of additional spending to those already involved. Without action to reduce barriers to entry, the benefits will remain concentrated among a relatively small number of established firms.
Investment in technology and skills
The government’s pledge to allocate at least 10% of the MoD equipment budget to advanced technologies—such as AI and drones—could be significant for forward-thinking manufacturers. The stable R&D and corporate tax environment is a welcome development, supporting planning for future innovation. However, while we support investment in STEM education, the £600m earmarked for training construction workers doesn’t address manufacturing’s widening skills gap, which continues to hold back growth.
Industrial Strategy
The additional £2bn per year in capital spending offers some promise for the sector, although much of this will be absorbed by defence priorities. More broadly, the sector is still waiting for the long-promised Industrial Strategy, which is essential to provide clarity on government plans to support manufacturing through targeted innovation, infrastructure, and workforce development initiatives that address the challenges unique to the UK market.
If you have any queries, please do reach out to us via the contact form below, or get in touch with our Manufacturing team above:
window.hsFormsOnReady = window.hsFormsOnReady || [];
window.hsFormsOnReady.push(()=>{
hbspt.forms.create({
portalId: 24971721,
formId: “16454627-b667-4c13-80ba-9eafaf739093”,
target: “#hbspt-form-1743091968000-3045921980”,
region: “eu1”,
})});
The post Spring Statement 2025 Commentary: Manufacturing was written by Menzies Harry Payne and appeared first on Menzies LLP.
