What does the Budget 2025 mean for the construction industry?
Posted on: 27 November, 2025
James Beckwith MA, MSc, LLM, PgCAP, FRICS, FAIQS, CQS, FCIArb, FHEA
Senior Lecturer, University of the Built Environment
Chancellor Rachel Reeves delivered the Government’s Budget 2025 yesterday, setting out a series of policy measures with significant implications for the construction sector. Industry reaction has been mixed, reflecting both welcome decisions and renewed pressures on firms already operating on tight margins.
Vicki Bell, Chief Executive of the Construction Equipment Association, noted that the “budget offers little direct reassurance for the construction equipment industry”, arguing that construction was “barely referenced despite its central role in supporting growth, infrastructure delivery and UK manufacturing.”
Wage bills
One of the most immediate impacts for employers relates to wage bills. The minimum wage for people aged 21 and over will rise by 4.1% in April, reaching £12.71/hour, while the rate for 18–20 year-olds will increase by 8.5% to £10.85/hour. For many workers, however, the continued freeze on income-tax and national-insurance thresholds means more individuals will be pushed into higher tax bands — effectively reducing disposable income despite wage growth.
Professor Andy Angus, Economist to the CEA and based at Cranfield University, warned that this comes “at the same time the increased National Living Wage raises input costs for firms from the construction supply chain. These pressures come at a time when many contractors and SMEs are already operating on tight margins.”
Landfill tax
In more positive news for the sector, the anticipated reform of landfill tax has been dropped. The Treasury had been consulting on plans to converge the standard and lower rates of landfill tax but will no longer proceed.
The standard rate will remain at £126.15 per tonne, with the lower rate for inert materials staying at £4.05 per tonne.
The Chancellor described maintaining the current system as “proportionate” — a decision intended “not to impose unavoidable costs on businesses” and “not to undermine the Government’s target of building 1.5 million new homes in England.”
Infrastructure funding
Significant infrastructure funding was also confirmed. The Budget allocates £890 million (rounded in some reports to £900m) to the Lower Thames Crossing — strengthening investment into major transport infrastructure in the South East.
Additional funding has been committed across the regions, including £20 million for the Peterborough Sports Quarter and several smaller, place-based capital projects designed to support regeneration.
Skills, infrastructure and business support
A further package of devolved, flexible funding was also announced for regional mayors to invest in skills, infrastructure and business support. This forms part of a wider commitment to local economic growth, though detailed allocations will depend on forthcoming mayoral and combined authority proposals.
Training and work placements for 18–21 year-olds
On skills and workforce development, the Chancellor announced new funding for training and work placements for 18–21 year-olds, including support for programmes that help young people access apprenticeships, education and employment.
A significant shift for the higher and further-education landscape is the Government’s intention to make apprenticeships free for apprentices under 25 working in small and medium-sized businesses, removing a cost barrier that has previously deterred participation.
Conclusion
While the Budget stops short of delivering major direct stimulus for construction, the combination of increased wage costs, steady landfill-tax arrangements and targeted infrastructure spending paints a nuanced picture — one where some firms may feel renewed cost pressures while others benefit from regional investment and apprenticeship reforms.
For a sector already navigating tight margins, affordability concerns and complex supply-chain conditions, the coming year will demand careful financial planning and close attention to how these measures play out on the ground.
