6 takeaways from the UK government’s 2025 Spending Review

The ICE has long argued that infrastructure is not just a cost: it’s a catalyst. A catalyst for growth, for resilience, and for the transition to net zero.

So, how does the UK government’s 2025 Spending Review measure up?

As the first multi-year review since 2021, it sets departmental budgets through to 2028/29 and capital investment plans to 2029/30.

Chancellor Rachel Reeves remarked last year that the October Budget represented “an end to short-termism”. The review builds on that.

Emphasising long-term investment, decarbonisation, and regional growth, it signals a shift in how the UK approaches infrastructure planning, prioritisation, and delivery – and could mark a pivotal moment in meeting the country’s infrastructure ambitions.

1. A major focus on infrastructure

This commitment to a clearer strategic direction for infrastructure is a positive step.

Long-term planning is essential to give confidence to the construction supply chain and unlock private investment.

The multi-year horizon in the Spending Review supports this.

Total departmental budgets are set to grow by 2.3% per year, in real terms, from 2023–24 to 2028–29.

Day-to-day spending will increase by 1.7% per year, while capital investment will grow by 3.6% per year to 2029–30.

This represents a £113 billion increase in capital spending compared to the previous government’s plans.

Most departments’ real-term budgets will be larger by the end of this parliament.

But it’s worth noting that most additional funding was already allocated as part of the first phase of the Spending Review, which was conducted in October alongside the Budget.

The introduction of rolling capital budgets is another welcome move.

This could help smooth out the volatility that has plagued infrastructure delivery for decades.

Too often, projects are rushed to meet arbitrary fiscal deadlines, leading to poor value for money and delivery delays.

2. A drive for decarbonisation

The Spending Review places significant emphasis on low-carbon energy infrastructure and energy security.

Major investments include:

• £14.2 billion for the Sizewell C nuclear plant,
• £2.5 billion for small modular reactors (SMRs); and
• £2.5 billion for nuclear fusion technology.

Land will also be made available for development at Sellafield, supporting the UK’s ambition to lead in clean energy innovation.

Carbon capture and storage receives a substantial boost, with £9.4 billion allocated to support projects such as Acorn in Aberdeenshire and Viking on Humberside.

These investments are complemented by £13.2 billion for the Warm Homes Plan, as set out in Labour’s manifesto, which aims to improve energy efficiency and reduce household bills.

3. Resilience investment is welcome, but limited

The chancellor announced £4.2 billion over three years to build and maintain flood defences across England.

This is a welcome investment to support a flood defence network that was designed and built before the severity of the climate challenge became fully clear.

But the Department for the Environment, Food and Rural Affairs (DEFRA) is facing budget cuts, which may limit its ability to address other infrastructure resilience challenges.

4. Billions allocated for public transport

Transport infrastructure is another clear focus in the review, with £15.6 billion committed to city region transport settlements.

There will be £10.2 billion spent on rail enhancements, including £3.5 billion for the Transpennine Route Upgrade and £2.5 billion for East West Rail.

A further £2.6 billion is earmarked for transport decarbonisation, supporting the shift to cleaner, more integrated mobility systems.

To support long-term demand for public transport services, the government has also extended the £3 cap on bus fares to 2027.

These investments are designed to support the development of a vision-led Integrated National Transport Strategy, which aims to connect people to opportunity and reduce regional disparities.

5. Green Book review could be a game-changer

One of the more promising developments in the Spending Review are the findings of HM Treasury’s Green Book review.

Set to be published in early 2026, the updated Green Book offers a real opportunity to embed regional equity and long-term value into infrastructure investment decisions – something ICE has consistently advocated for.

The Green Book review sets out six actions that, if implemented effectively, could shift the focus from short-term economic returns to longer-term social, environmental, and resilience outcomes.

It could also empower local leaders by better capturing the value of place-based investment.

The ICE will analyse the Green Book review in further detail and publish a blog shortly.

6. Transparency and efficiency measures

While the Spending Review offers many positives, it also presents challenges.

Requiring all departments to deliver at least 5% savings and efficiencies could place pressure on already stretched services.

All departments must also reduce administrative budgets by 16% in real terms in the next four years. To support this transformation, the government has established a £3.25 billion fund to drive digital reform and improve public service delivery.

Meanwhile, in a move to improve transparency and accountability, all projects and programmes in the Government Major Projects Portfolio (GMPP) must now publish a business case within four months of HM Treasury approval.

This reform aims to enhance public trust and ensure better value for money in infrastructure delivery.