Investment was the key message for small business owners in the government’s Spending Review. Support for adopting new technology and AI, more investment into research and development, and a push to meet net zero targets were some of the key points.
We’ve summarised the main takeaways from the Spending Review – plus a look at the government’s 10-year industrial plan and what it means for small businesses.
Overview of the Spending Review 2025
A Spending Review is when the government sets out its public spending plans for the next few years. Allocating funds for both day-to-day operations while explaining how they’ll fund bigger projects like housing or transport targets.
Unlike the annual Budget, which focuses on revenue, the Spending Review dictates how revenue will be distributed.
While spending on public services and defense caught the headlines, there were updates on how the government plans to support the growth of small businesses.
Investment into AI adoption for small businesses
In January 2025, the government announced the AI Opportunities Action Plan – a campaign to support businesses in adopting AI. In the Spending Review, the government shared some details on how they’ll achieve this.
The government revealed that they’ve committed £2 billion to the action plan. Half of that amount will be used for the Sovereign Computing Capacity – which is the UK’s technology infrastructure and will be key to supporting AI adoption across the country.
But a portion has been set aside for supporting businesses and young entrepreneurs in using AI.
AI growth zones are being set up around the UK, where technology businesses will be given extra support to help them grow. The majority of the support will come from a simpler planning process and increased private investment for businesses in the zones.
And the more long-term investment into AI comes from the increased research and development funding.
A boost in research and development funding
The government has pledged £86 billion towards public R&D by 2029/30 and part of this will be used to support business innovation.
Here’s how some of the funding will be allocated:
- the regional Innovation Accelerator programme is getting a significant boost. All seven established authorities across England will receive a minimum of £30 million each
- the R&D Missions Accelerator Programme has received a substantial boost with an additional £500 million in funding. This initiative creates opportunities for businesses to collaborate with each other to contribute to government goals
- the Advanced Research and Invention Agency (ARIA) will receive increased funding, so it can pursue high-risk, high-reward businesses and reward innovation
The plan for all this funding is to create more financial headroom for businesses to be more innovative.
Plans to reduce the cost of doing business
The government plans to make the UK’s infrastructure more efficient with AI by streamlining previously time-consuming or complex processes.
Investing in AI tools could cut regulatory costs, simplify planning permission, and speed up grant delivery – which would ultimately save businesses time and money.
The government is heavily investing in digitising HMRC and the tax process, hoping to make tax returns more efficient and responsive. Which could reduce time-consuming errors and costly fines for small businesses.
And £500 million is being allocated to make HMRC primarily digital by 2029, aiming for 90 per cent of interactions to be self-service. This comes alongside £1.6 billion to modernise HMRC’s technology.
The government also announced an efficiency plan that focuses on early tax compliance through automation and self-serve channels. And the merger of the Valuation Office Agency (VOA) into HMRC is also expected to improve customer service.
The VOA acts as the government’s expert property valuer and makes sure property taxes and benefits are based on accurate valuations. This could make a big difference to how effectively capital gains tax and business rates are calculated.
Push to meet net zero targets
There’ll be more investment into clean energy in the UK, with a focus on nuclear and wind energy.
- Sizewell C, a nuclear power plant project in Suffolk received £14.2 billion
- the first small modular reactor, which is essentially a small nuclear power plant, was given £2.5 billion for development and another £2.5 billion for fusion technology
Great British Energy also maintained its £8.3 billion budget for clean power projects, including support for offshore wind farms.
More sustainable and self-sufficient energy should be a positive thing for small businesses. The UK being self-reliant for energy means an energy crisis (like in 2022) is less likely. But it could make energy prices cheaper too.
And the government has more lofty plans for reducing energy costs for business in the long-term.
How the 10-year industrial strategy helps small businesses
Shortly after the Spending Review, the government announced their 10-year industrial strategy for businesses. The core idea is to make the UK the best place to do business by reducing energy costs and increasing investment.
There were a variety of plans laid out in the strategy, like:
- energy cost reduction – slashing electricity costs for energy-intensive manufacturers by up to 25 per cent from 2027. They’ll also reduce regulatory burdens by cutting administrative costs by 25 per cent
- investment and funding – increasing the British Business Bank’s financial capacity to £25.6 billion to invest in innovative businesses
- R&D boost – significantly increasing R&D spending to £22.6 billion per year by 2029/30, with major investments in AI and advanced manufacturing
- attracting talent – a new Global Talent Taskforce received £54 million to attract the best workers
- sector focus – eight high-growth sectors have unique 10-year funding plans: advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services
The government will reveal more details about how these plans will work for business owners soon. But it’s clear investment is how the government plans to support small businesses in the short and long term.
More useful guides for small business owners
- What are your allowable expenses for your business?
- Making Tax Digital for business owners
- Small business tax changes
- How to use HMRC Time to Pay
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