The UK Chancellor’s 2025 Autumn Budget delivered last week has sparked major conversation across the country – not least within construction, where decisions around infrastructure, taxation, workforce development and wage costs will all impact the sector, some positively and some negatively.
So, what are the key measures, and how might they help or hinder construction? In this week’s blog, we’re aiming for a balanced breakdown by highlighting some of the pros and cons.
The Pros: Opportunities for growth and stability
1. Increased funding for infrastructure
Industry groups, including the Home Builders Federation, have welcomed significant investment in infrastructure, which could strengthen the pipeline of national and regional projects and give contractors greater certainty. Examples from the Budget include £890m to support the Lower Thames Crossing, £1.5 billion for the construction of new neighbourhood health centres and local services, and £13 billion of devolved, flexible growth and infrastructure funding for regional mayors.
2. Support for skills and workforce development
To help address labour and skills shortages, the Budget allocates £1.5 billion for training and work placements, including programmes to help young people access apprenticeships, education and employment. The Government also plans to make apprenticeships free for under-25s in small and medium-sized businesses – removing a key cost barrier and supporting wider workforce development.
3. Tax incentives
The UK Budget 2025 introduces a new 40% first-year allowance for most plant and machinery expenditure, alongside changes to writing-down allowances. For construction, this means firms can offset a larger portion of upfront investment in equipment, fixtures and leased assets against tax more quickly, improving cash flow and incentivising capital investment.
4. Government decision not to proceed with Landfill Tax changes
In another welcome move for the sector, the government confirmed it will not implement previously proposed Landfill Tax reforms. These reforms would have increased disposal costs and added complexity for firms managing soil, aggregate and mixed waste. By retaining the current system, the government has avoided placing additional financial pressure on contractors at a time when margins remain tight.
The Cons: Challenges and pressure points for the sector
1. Rising cost pressures (especially wage bills)
One of the clearest immediate impacts of the Budget is that wage bills look set to rise across the industry:
- The National Living Wage for workers aged 21+ will increase by 4.1% to £12.71/hour.
- Rates for 18–20-year-olds will rise by 8.5% to £10.85/hour.
- Income-tax and national-insurance thresholds remain frozen, meaning more workers could drift into higher tax bands despite pay increases.
For construction firms, these shifts translate into higher labour costs across projects; increased pressure on SMEs working to fixed budgets; greater strain on supply chains as subcontractors pass on wage-driven cost increases; and more uncertainty when tendering, as wage inflation makes accurate pricing more challenging.
2. Still too little support for home buyers
The Budget again overlooks the need for enhanced support for prospective home buyers. Limited access to affordable mortgage lending continues to inhibit demand and restrict the capacity of builders to increase housing supply.
Unless the Government addresses issues around viability and affordability soon, its ambitions for housing delivery may become progressively harder to achieve.
3. Limited clarity on long-term capital commitments
Some of the Budget’s investment announcements are short-term or dependent on future fiscal conditions. Without stable, multi-year funding, developers and contractors may hesitate to commit to long-lead projects or expansion plans.
Final thoughts
Overall, the 2025 Autumn Budget delivers a mix of encouraging signals and practical challenges for construction businesses.
The decision not to pursue Landfill Tax changes – alongside new investment in infrastructure and skills – is positive news. However, wage inflation and supply-chain pressures could erode margins, while limited support for first-time buyers may dampen demand.
For many in the industry, the year ahead will require careful financial planning to balance rising costs with the opportunities the Budget aims to unlock.
What do you think?
Will the Autumn Budget give construction the boost it needs – or are rising costs still the biggest obstacle? Join the conversation by commenting on our Facebook or LinkedIn pages.
02.12.2025
Feature image: Freepik
