What to expect from the 2025 Spring Forecast

If you’re a business owner, mark 26th March on your calendar—because that’s when the government is set to drop its 2025 Spring Forecast. Think of it as a financial weather report, but instead of telling you whether to bring an umbrella, it’ll give you an idea of how the economy is shaping up for the year ahead.

With whispers of tax changes, rising costs, and a possible slowdown in growth, this forecast could have some major implications for your business. Let’s break down what you might expect—and how to prepare.

Economic outlook

Let’s start with the big picture. Reports suggest that economic growth might not be as strong as previously hoped. The Office for Budget Responsibility (OBR) is expected to lower its growth forecast, which could eliminate the £9.9 billion buffer in the Chancellor’s budget, meaning less wiggle room for government spending and, potentially, more pressure on businesses.

What does that mean for you? Well, if the economy isn’t growing as fast as planned, the government may look for ways to boost it—or tighten the purse strings. Either way, it’s something to keep an eye on.

National Insurance and tax hikes

One of the biggest concerns for business owners is tax changes, particularly National Insurance Contributions (NICs). In the Autumn Budget 2024, the government announced a £40 billion tax increase, including a rise in employers’ National Insurance Contributions (NICs) to 15% on salaries above £5,000, effective from April 6, 2025.  

For a company with 10 employees earning £30K a year, the annual cost of employers' National Insurance will rise by an extra £3,900. In short, you may need to dig deep and find efficiencies by looking at your projected resource forecasts and setting a mandate to your management team to become more ‘lean’…

Essentially, if you’re an employer, your wage bill is about to get heavier. Whether that means adjusting budgets, reviewing hiring plans, or finding efficiencies elsewhere, it’s worth planning ahead.

…By reducing headcount forecasts and exploring ways for staff to enhance efficiency, you might be able to take on additional work to offset the increase in business costs. It's also beneficial to evaluate your business processes to identify and eliminate non-value-added activities, which can boost productivity and help save costs.

Employment and wage considerations

Speaking of payroll, the job market is facing its own set of challenges. A recent CIPD survey found that 1 in 4 employers are considering reducing their workforce or slowing down hiring due to rising costs.

Add to that a 6.7% increase on the National Living Wage (to £12.21 per hour from April 6, 2025), and suddenly, staffing budgets look very different.

It's important for businesses to avoid age discrimination to keep costs in check. Favouring younger employees with more paid hours can put you at risk of violating the Equality Act 2010. Instead, concentrate on boosting productivity within your team and addressing any underperformance promptly.

If you’re thinking, how am I supposed to keep my best people without breaking the bank?—you’re not alone. Whether it’s improving efficiency, offering non-monetary perks, or restructuring your team, now’s the time to get creative.

Inflation and public sector pay

Reports suggest that inflation is predicted to rise to 3.7%, which means higher costs for pretty much everything. Meanwhile, public sector unions are pushing for bigger pay rises, which could have a knock-on effect on private businesses. If public wages go up, it might put pressure on businesses to follow suit to stay competitive in attracting talent.

For business owners, this is another balancing act: keeping wages fair while ensuring the business stays financially stable.

Preparing for the spring forecast

While the Chancellor has indicated a commitment to one major fiscal event per year, the upcoming Spring Forecast may still introduce adjustments affecting businesses. It’s crucial for business owners to stay informed and consult with payroll professionals or use payroll software to navigate potential changes effectively.

If you use our BrightHR payroll software to manage your payroll, we’ll shortly be releasing our end of year update and guidance notes to accompany the changes. All statutory increases to National Insurance will be automatically increased from 6 April 2025. National Minimum wage rate increases will need to be managed through the employee records in BrightHR to take effect in the payroll system.

The Spring Forecast is shaping up to be an important one for UK businesses. Whether it’s tax hikes, wage increases, or economic uncertainty, there’s plenty to think about. But while we can’t control government policy, we can control how we respond to it.

So, take a deep breath, get your plans in place, and let’s see what 26th March brings.