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2025 Spending Review: what it means for public procurement

2025 Spending Review: what it means for public procurement

Posted by Ben Pollard Picture of Ben Pollard on 11 June 2025
English Devolution & public sector sales: are you ready?
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On June 11th, 2025, the Chancellor unveiled a Spending Review that will shape the future procurement landscape for public sector suppliers and buyers.
With budgets tightened, capital redirected, and transformation funding unlocked, the government is doubling down on efficiency, innovation, and delivery - and procurement will be the engine driving it.

In this blog, we break down exactly what the 2025 Spending Review (and March's Spring Budget) mean for public procurement - and some of the key opportunities in your market.

Skip ahead to read about:

 

📈 Introduction: The 2025 Spending Review (SR25)

The 2025 Spending Review (SR25) sets out the Government’s priorities for public spending over the coming years, detailing how departments, the NHS, and local authorities will be funded - and what outcomes they’re expected to deliver.

This year’s Review puts efficiency, digital transformation, and long-term investment at the centre of public sector reform. For suppliers, SR25 offers a clear signal: solutions that deliver impact, innovation, and value-for-money are more in demand than ever.

 

💸 Core Themes: Efficiency and Savings

At the heart of SR25 is a drive to do more with less. Departments face firm expectations to cut administrative budgets by 16% by FY29/30, requiring them to become leaner, more digital, and more outcomes-driven.

Additionally, between FY25/26 and FY28/29, the Home Office, FCDO, MHCLG, DCMS, HS2, DEFRA, DWP, HMRC, and the Treasury will all see real-term reductions in their annual Departmental Expenditure Limits (DELs).

Only 4 departments - MOD, SIA, DBT, and the Law Officers’ Departments - will see their DELs rise by 3% or more over that same period.

🔑 What it means for suppliers:

Any solution that can help government cut costs, automate processes, or measure impact is in demand. From SaaS platforms to outcome-based consulting, this is a pivotal moment for suppliers that can provide value for money and offer long-term savings.

Do more business with government - try Tussell

 

 

🏥 What about the NHS & Local Authorities?

 

While SR25 puts pressure on many departments to cut costs, it could be argued that the NHS and local authorities emerge as two of the biggest winners in terms of funding.

 

 

 

Discover how DHSC & NHS England do procurement

 

 

The NHS gets a productivity-focused package:

 

  • Up to £10bn invested in NHS technology and digital transformation by FY28/29 - an almost 50% increase from FY25/26

  • DHSC capital budget to increase by £2.3bn between FY23/24 and FY29/30

  • A renewed push to reduce waiting lists, improve outcomes and modernise delivery

 

Meanwhile, local authorities gain long-term budget clarity:

 

  • A £3.3bn real-terms grant uplift by FY28/29

  • Core spending power to rise 3.1% in real terms

 

🔑 What it means for suppliers:

 

Despite these budget increases and new funding pots, financial pressure on local authorities remains high - and value-for-money will remain a top priority for procurement teams.

 

Book a chat with the Tussell team to learn how you can use data to inform your price-to-win strategy.

 

 

❓ What does SR25 mean for Procurement in your Sector? 

Depending on your market, SR25 offers a range of potential opportunities you should be aware of.

 

📚 Skills, Training & Workforce

The 2025 Spending Review sends a clear signal: building Britain’s workforce is central to delivering growth, transformation, and infrastructure over the next five years.

For training, HR, and recruitment providers, several key funds and reforms may be of interest.

 

👷 The Construction Skills Fund

SR25 confirms the £625 million Construction Skills Fund first announced in the Spring Statement. This has been set aside to finance the training of 60,000 skilled construction workers by the end of the Parliament.

🔑 What it means for suppliers:

The Construction Skills Fund will unlock opportunities for training providers to partner with buyers looking to scale up and deliver the government’s 1.5 million homes target.

 

Recruitment

Discover the key trends driving the public sector recruitment market

 

👔 Public Sector Workforce Reform

Government departments are under pressure to cut admin costs by 16% by 2030, with a clear pivot toward automation, digital delivery, and a leaner civil service.

SR25 also:

  • Commits that 1 in 10 civil servants will be in digital roles by 2030

  • Allocates £1.7bn to HMRC to recruit 5,500 compliance staff and 2,400 debt management roles

🔑 What it means for suppliers:

The Spending Review offers an opportunity for digital recruiters, HR tech providers, and L&D specialists to support civil service transformation through automation, upskilling, and workforce modernisation.

 

💼 Investment in Skills & Employment Support

SR25 promises £1.2bn in additional skills funding annually by FY28/29. It also raises employment support funding to £3.5bn, with an emphasis on:

  • Tackling economic inactivity

  • Supporting people with health conditions or disabilities

  • Delivering local employment pilots (e.g. Connect to Work, youth/inactivity trailblazers)

🔑 What it means for suppliers:

  • Look out for opportunities from DWP, DfE, and local authorities in Tussell

  • Providers with wraparound employability services or specialist expertise in disability/youth support are well-positioned

  • The post-16 education and skills strategy is expected later in 2025 - suppliers should prepare for more information once this is confirmed

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💻 Technology & Transformation

SR25 puts forward technology investment as a central strategy for modernising the state and unlocking productivity gains across government.

With public sector productivity still 4.6% below pre-pandemic levels, most departments are under pressure to deliver more with less - and that’s translating into substantial digital and AI investment.

For tech and transformation suppliers, SR25 presents a range of potential opportunities:

 

🏛️ The £3.25bn Transformation Fund

The Transformation Fund promised in the Spring Statement was reconfirmed in SR25.

With this Fund, "the Government will build strong digital and technology foundations, tackle urgent cybersecurity and technical resilience risks, modernise public service delivery and drive a major overhaul in government productivity and efficiency."

An additional £1.2bn will also be provided to DSIT "to drive forward cross-cutting digital priorities."

🔑 What it means for suppliers:

📊 Tussell’s 2025 IT Market Snapshot shows a 41% increase in public sector IT procurement spend over the last 4 years - this growth looks set to continue.

 

🤖 AI & Automation in the Spotlight

The Spending Review confirms £2bn for AI, including:

  • A 20-fold expansion of AI compute infrastructure

  • A new UK Sovereign AI Unit

  • AI Adoption Fund to scale frontline use cases

  • Funding for AI skills, fellowships and talent visas

🔑 What it means for suppliers:

AI is seen as a lever for productivity and cost-saving. Consider how your AI solutions can support these goals.

 

Discover how the public sector in procuring AI

 

🛡️ Defence Tech & Innovation: £400m Fund Now Live

As announced earlier this year, UK Defence Innovation (UKDI) is launching with a £400m annual budget. It will be tasked with:

  • Fast-tracking procurement

  • Scaling AI, drone, sensor and dual-use technologies

  • Creating a clearer path for SMEs and startups in Defence

in February, the government announced that NATO-qualifying defence spending will rise to 2.6% of Gross Domestic Product (GDP) by 2027

This will include investments into Directed Energy Weapons and other advanced capabilities.

 

Access Tussell's 2025 Public Sector Defence Procurement Tracker

 

🔑 What it means for suppliers:

Tussell, the British Chamber of Commerce, and AutogenAI's 2025 SME Procurement Tracker found that in 2024, only 5% of MOD's direct spending was with SMEs. The UKDI could make public sector Defence a more viable market for small and medium-sized firms.

 

🧮 Back-Office Reform & Shared Services

SR25 sets aside £800m+ to streamline finance, HR, and procurement systems across Central Government.

Suppliers in all markets - including this one - should look out for Preliminary Market Engagement Notices and Planned Procurement Notices and engage with buyers early to help shape future procurements.

Tech Logo Row B&W March 2025 PNG v2

For skills how-to

 

🏗️ Construction & Engineering

The Spring Statement 2025 set the direction. The Spending Review 2025 cements it: construction and engineering are central to the Government's growth, housing, and infrastructure ambitions over the coming decade.

 

🏘️ Housing Delivery: 10-Year Programme Confirmed

The government’s £39bn Affordable Homes Programme is now locked in, building on the £2bn uplift announced in the Spring Statement for FY26/27, which will:

  • Deliver up to 18,000 homes

  • Unlock new projects across councils and housing associations

Additionally, £950 million has been set aside to support temporary accommodation capacity via local authorities.

 

Dive into the key trends driving the public sector AEC Consulting market

 

🚧 Infrastructure: Transport, Connectivity & Local Delivery

SR25 also confirms major funding across:

  • Transport for City Regions – £15.6bn devolved to metro mayors

  • East West Rail – £2.5bn to drive delivery

  • Transpennine Route Upgrade – £3.5bn confirmed

  • Local roads and maintenance – reaffirmed Spring Statement commitments of £1.3bn (renewals) and £1.6bn (maintenance) for FY25/26

Plus, a new 10-Year Infrastructure Strategy is expected imminently.

🔑 What it means for suppliers:

Construction and engineering firms specialising in transport and infrastructure should gear up and monitor Tussell for upcoming opportunities.

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♻️ Efficiency, Sustainability & Net Zero

 

The Government's Spring Statement commitment to deliver infrastructure that is “environmentally sustainable and aligned with its long-term net zero ambitions” has been reitterated by SR25.

The Spending Review sets out the following clean energy investments that will rely on engineering and construction capability:

  • £14.2 billion for Sizewell C nuclear

  • £2.5 billion for Small Modular Reactors

  • £9.4 billion for Carbon Capture, Usage and Storage (CCUS)

  • £400 million for EV charging infrastructure

  • £616 million for Active Travel (cycling/walking infrastructure)

🔑 What it means for suppliers:

For construction suppliers, social value is paramount to your success in the public sector - even when bidding for projects not directly related to sustainability. 

Works Logo Row B&W March 2025 PNG v2

Do more business with government - try Tussell

 

👵 Social Care

The Spending Review 2025 reinforces the Government’s commitment to reforming social care - particularly through digital transformation, early intervention, and integrated local delivery.

Adult social care will receive over £4bn in additional funding by FY28/29, including an uplift to the NHS’s Better Care Fund contribution. This will support digital transformation, home-based care models, and improvements to the care workforce.

In children’s services, the Government is investing £500m from the Transformation Fund to reduce the number of children entering care -backed by £523m per year for early intervention through the Local Government Finance Settlement (LGFS).

Local authorities - key social care commissioners - will also see core spending power grow 3.1% per year in real terms through FY28/29.

 

🔑 What it means for suppliers:

 

Whilst additional budget has been set aside for social care, local authorities are still under significant economic pressure.

 

SR25 suggests that suppliers focussed on early intervention have a strategic advantage - especially if they can demonstrate medium to long-term cost savings.

 

 

Discover what English Devolution means for public sector procurement

 

🧹 Facilities Management

The Spending Review 2025 reinforces the UK Government’s commitment to upgrading the public estate - from hospitals and schools to prisons, housing, and military infrastructure.

With billions in confirmed capital investment, FM and estates suppliers will play a vital role in maintaining, operating, and future-proofing public sector assets.

SR25 confirms funding for long-term capital renewal across multiple departments, including:

  • "Investing £30 billion over the next five years in day-to-day maintenance and repair of the NHS estate."

  • "£2.4 billion per year for the School Rebuilding Programme" over the next 4 years, and an increased maintenance investment to "improve the condition of the school estate."

  • Upgrades to court buildings and probation facilities

🔑 What it means for suppliers:

FM providers with experience in healthcare, education or secure environments are positioned well for success. Book a chat with the Tussell team to learn how we can help you build more public sector pipeline.

FM Logo Row B&W March 2025 PNG v2TUSSELL_Demo_CTA_Banners (6)

 

🧠 Consulting

While the Government has made efforts to reduce its reliance on traditional management consultancy, the large-scale projects proposed in SR25 may require specialist support.

Across digital transformation, workforce reform, SEND, Local Government Devolution, and NHS productivity, buyers are under growing pressure to deliver faster, leaner, and more accountable change.

That’s where specialist consultancies, delivery partners, and transformation support providers often come in.

🔑 What it means for suppliers:

Despite several previous Government commitments to reduce consultancy spend, Tussell's 2024 Management Consultancy Snapshot shows that public sector spending with Management Consulting firms increased 57% between FY19/20 and FY23/24.

Book a chat with the Tussell team to learn how you can use data to succeed in the public sector consulting market.

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🧾 Summary & Conclusion: The 2025 Spending Review

SR25 sets out a clear vision: a leaner, smarter and more accountable public sector, underpinned by digital transformation, workforce investment, and long-term infrastructure delivery.

Whether you're bidding into central government, the NHS, or a local authority, now is the time to position your offer around cost-effectiveness, outcomes, and alignment with strategic priorities.

💡 Want to turn SR25 into sales pipeline?

Tussell’s market intelligence platform helps suppliers spot opportunities early, identify the right procurement frameworks, and build data-led public sector sales strategies - all in one place.

👉 Book a chat with the Tussell team to see how we can help you do more business with government in FY25/26 and beyond.

 

Do more business with government - try Tussell