UK Autumn Budget 2025: Debt Cuts Amid Productivity Crisis and Global Slowdown

When the UK government unveiled the Autumn Budget 2025 in London this November, it wasn’t just balancing the books — it was trying to mend a decade-long economic wound. Despite hitting fiscal targets a year early, the Office for Budget Responsibility (OBR) delivered a sobering truth: the UK’s productivity is still broken. And that’s costing the country billions — and possibly, the next government’s credibility.

Why the Numbers Don’t Tell the Whole Story

The Her Majesty's Treasury announced it had exceeded its fiscal rules by £21.7 billion on debt reduction and £24.4 billion on investment limits, hitting targets for 2029-30 a full year ahead of schedule. That’s impressive on paper. But here’s the twist: the OBR slashed its forecast for medium-term productivity growth — not because of new policies, but because the UK’s slump since the Global Financial Crisis (GFC) of 2007-2008 has refused to heal.

That downgrade alone knocks £16 billion off projected tax revenues by 2029-30. To put that in perspective: if productivity had kept pace with pre-GFC trends, every man, woman, and child in the UK would be £15,000 richer in 2024. That’s not inflation. That’s £600 billion in lost national output — enough to fund the NHS for over two years.

The Productivity Paradox

The OBR was clear: this wasn’t about tax hikes or spending cuts. It was about structural decay. Footnote 23 of the budget document notes productivity growth “slowed significantly” after 2008. Footnote 29 insists the revision was “not prompted by any particular government policy decisions.” In other words, even if you liked the last government’s moves — or hated them — the problem predates them.

It’s like your car’s engine has been sputtering since 2008, and no one’s bothered to replace the spark plugs. The government’s now throwing in a new fuel filter — £120 billion in additional capital spending over the next Parliament — but the engine’s still old.

Who’s Betting Against the Government?

Enter Schroders, the London-based asset manager. In its November 2025 analysis, it didn’t mince words: “Those less efficient policies mean revenues are likely to fall short of the Government’s expectations as we head into the next general election.”

That’s not just a warning. It’s a prediction. The next election must happen by January 28, 2030. By then, voters will be asking: Why did we cut debt but not wages? Why did we spend more on roads and bridges but not on skills and tech? The OBR’s productivity downgrade means the government’s £16 billion buffer is already evaporating — not from mismanagement, but from a deeper, more stubborn rot.

What’s Actually Being Done?

The government’s playing the long game. Three pillars:

• Protecting over £120 billion in extra capital spending across England, Scotland, Wales, and Northern Ireland
• Overhauling the planning system to cut red tape on housing and infrastructure
• Pushing forward the 10-year Infrastructure Strategy and Industrial Strategy

But here’s the catch: infrastructure doesn’t pay off overnight. A new rail line takes a decade. A skills program takes five years to show up in GDP stats. Voters won’t feel the benefit before the next election — if they feel it at all.

The Bigger Picture: Global Headwinds

The International Monetary Fund (IMF) expects global growth to slip from 3.3% in 2024 to 3.1% by 2026. That’s not a crash — but it’s enough to choke export demand and dampen investor confidence. The UK, already struggling with weak productivity, now has to grow its way out of debt while the world slows down.

Meanwhile, the Institute for Fiscal Studies (IFS) released its own analysis in November — though details remain sparse. But if history’s any guide, they’ll likely point out that the UK has been here before: after 2008, after Brexit, after the pandemic. Each time, the government promised structural reform. Each time, productivity stayed flat.

What’s Next?

The next 18 months will be critical. Will the planning reforms actually speed up construction? Will businesses invest in automation, or just keep hiring cheaper labor? Will the Bank of England’s interest rate cuts finally spark private sector innovation — or just inflate asset prices?

One thing’s certain: the government’s fiscal discipline is admirable. But without a productivity revival, it’s like cleaning your kitchen while the roof leaks.

Why This Matters to You

If productivity doesn’t rise, wages won’t. Public services won’t improve. Taxes might still need to rise — just later, and harder. The £16 billion hole isn’t just a budget line. It’s a gap between what the country can afford, and what people expect.