17th July 2025

Spending Review 2025: A Delivery System Under Pressure

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Author

Michael Urie

Associate Director (Market Intelligence)

A Welcome Boost—But Can the System Deliver?

The ambition is clear, but delivery remains the real test. As a trusted advisor to public clients across sectors, Gardiner & Theobald (G&T) understands the complexity of turning funding into tangible, value-led outcomes. Our insight into delivery mobilisation, governance and strategic programme control offers a lens through which to view the challenges ahead.

The UK Government’s June 2025 Spending Review unveiled one of the most ambitious capital investment programmes in over a decade, committing £113 billion over four years across infrastructure, housing, energy, education, health, and justice.

For the construction industry, the response has been broadly positive. The Review offers long-sought certainty on pipeline funding, with a multi-year capital settlement that signals a shift away from stop-start planning cycles. Major announcements on net zero infrastructure, affordable housing delivery and NHS estate modernisation have been welcomed as evidence that government now views construction not merely as a cost centre, but as an enabler of long-term national resilience, productivity and regional renewal.

Encouragingly, the Review also embeds delivery enablers, from planning reforms to skills funding and digital transformation. Yet fundamental questions remain: Can the existing system translate this ambitious funding into tangible outcomes? Institutional friction, skills shortages and capacity constraints pose significant challenges.

The Structural Delivery Challenge

Despite increased funding, systemic constraints remain severe:

Persistent delivery capacity shortfalls within public sector programme and project teams
A widening skills gap, especially in planning, retrofit, and sustainable construction methods
Ongoing skilled labour constraints and cost pressures, with wage growth outpacing inflation
High civil service turnover causing instability and inconsistent oversight

The National Infrastructure and Service Transformation Authority (NISTA) continues to flag systemic concerns: 12% of major government projects are rated red—indicating successful delivery appears unachievable due to major, unresolved issues—while 72% are rated amber, with significant challenges that require active management but remain resolvable.^[1] This underscores the need for immediate improvements in programme governance and delivery capability.

The Government’s first integrated, cross-sector National Infrastructure Strategy^[2] provides welcome clarity, offering a long-term investment roadmap for public and private investment across transport, housing, energy, digital and water infrastructure. However, its success depends heavily on execution—specifically the alignment of central and local government capabilities, procurement strategies and market confidence

ONS data reinforces the scale of the workforce challenge. Construction employment reached 2,142,887 in Q1 2025 yet remains 278,180 below pre-pandemic levels (Q1 2019).^[3]Technical skills shortages in complex infrastructure sectors such as nuclear, renewables, and transport amplify delivery risks, inflating costs and extending timelines.

There is also growing industry frustration at the disconnect between headline funding commitments and project-level delivery plans. Without clarity on scheme timelines, sequencing, and commercial frameworks, even well-capitalised firms struggle to prepare and invest with confidence. The real test for this Spending Review—and the new strategy—will be whether they translate into a coherent, credible and investable pipeline over the next 6–12 months.

Encouraging Signals: Strategic Reform Meets Sector Demands

The Spending Review^[4]makes significant strategic commitments to energy transition, transport and housing:

£14.2 billion in direct government backing for Sizewell C, alongside £2.5 billion each for small modular reactors (SMRs) and fusion technology
£9.4bn for carbon capture and storage (CCS) hubs and £13.2bn for energy efficiency upgrades under the Warm Homes Plan
£10.2bn for rail enhancements (Transpennine Route Upgrade and East West Rail)
£15.6bn through new Transport for City Regions settlement
£2.2bn multi-year settlement for Transport for London—its largest in over a decade
£39bn for the new 10-year Affordable Homes Programme, supplemented by £2.5bn in low-interest loans for social housing providers
£29 billion real-terms increase in annual NHS day-to-day funding by 2028–29, alongside a £2.3 billion real-terms uplift in NHS capital budgets—the largest capital settlement for Department of Health and Social Care (DHSC) to date
£4.7 billion cash boost to the core schools budget by 2028–29 (approx £2 billion real‑terms increase), £2.4 billion per year for school rebuilding over the next four years

This represents a meaningful shift—not just in how much is being spent, but in how long the government is committing to spend it. But how projects are selected and prioritised still hinges on the rules that govern public investment decisions, namely the Treasury’s Green Book.^[5]

The Green Book is the UK Government’s central guidance for appraising public investment decisions, setting out how departments should assess the costs, benefits and overall value-for-money of spending proposals. Historically, much emphasis has been placed on benefit-cost ratios (BCRs), often favouring projects with short-term, easily quantifiable economic returns. As a result, schemes with harder-to-monetise benefits—such as regional equity, long-term resilience or environmental improvements—have often been disadvantaged and struggled to gain approval.

That may now change. The 2025 Green Book review—announced in January and published alongside the June Spending Review—highlights the need to rebalance appraisal practice. Key reforms coming in early 2026 include: reducing over-reliance on BCR thresholds, encouraging “place‑based” strategic business cases that recognise synergies across projects and resourcing better assessment of transformational and long‑term outcomes.^[6]

However, appraisal reform alone won’t guarantee successful delivery. Industry bodies including Civil Engineering Contractors Association (CECA), Royal Institution of Chartered Surveyors (RICS) and UK Green Building Council (UKGBC) have welcomed the shift in direction—but they also warn that tangible progress depends on the right enabling conditions: sufficient workforce capacity, streamlined planning and more joined-up delivery models across central government, local authorities and arm’s-length bodies.

NHS Investment: Welcome Injection, But Delivery Complexities Persist

The additional capital for the NHS—while headline-grabbing—is best understood in the context of the vast and ageing NHS estate. There are over 200 NHS Trusts across England alone, many grappling with significant maintenance backlogs that now total £13.8 billion across the system. While the capital uplift is a welcome intervention, the scale of the challenge demands more than funding alone.

Moreover, capital funding for NHS Trusts is not “free” money. Trusts are required to pay annual charges on Public Dividend Capital (PDC), effectively interest on government funding. This has material consequences for affordability. A £1 billion hospital may be fully funded from a capital perspective, but that does not guarantee the Trust can afford to operate it—once revenue costs for staffing, facilities management, energy and maintenance are considered alongside PDC payments. These issues are particularly acute in Trusts with limited income flexibility.

Added to this are practical delivery constraints. Trusts often receive funding approval late in the financial year, with requirements to spend it within tight timelines, curtailing scope for long-term planning or early consultant appointments. This undermines value and delivery certainty. Furthermore, the current NHS business case process—requiring Strategic Outline Case (SOC), Outline Business Case (OBC) and Full Business Case (FBC) approvals—can take years to navigate. Delays are exacerbated by the potential abolishment of NHS England, creating uncertainty about future governance and decision-making authority.

From a programme perspective, this creates a complex landscape. G&T understands the operational and financial pressures facing the NHS. We bring experience not just in capital delivery, but in helping NHS Trusts shape business cases that reflect whole-life affordability, operational resilience and clinical outcomes—ensuring investments are truly sustainable. Our ability to mobilise early, integrate commercial strategy with estate planning, and streamline governance processes has helped Trusts accelerate delivery while protecting long-term value.

The Capacity Crunch: Skills, Planning and Workforce Readiness

While investment commitments and appraisal reform are important steps, the promise of investment is only as good as the system’s ability to deliver it. That system is straining:

The Construction Industry Training Board (CITB) estimates 250,000 additional workers will be needed by 2028 to meet projected demand across the UK construction sector^[7]

According to a 2025 industry survey by RSM UK, only 31% of property businesses believe the Governmen`t’s 1.5 million homes target is achievable, citing barriers around affordable housing, land availability and supply chain capacity^[8]
Annual apprenticeship investment of £1.2 billion through to 2029 is a positive step, but may fall short in addressing digital and MMC skills gaps

Local planning authorities remain severely under-resourced, risking long lead times, inconsistent decision-making, and delivery bottlenecks^[9]

Encouragingly, the £625m allocated to train up to 60,000 construction workers signals a step towards targeted upskilling.^[10] But as industry leaders have warned, more clarity is needed on how this will address systemic issues like the ageing workforce, limited diversity and digital skills gaps.

Meanwhile, concerns around supply chain capacity and competition are growing. A shrinking pool of contractors and ongoing insolvency risks are raising legitimate questions about the market’s ability to sustain competitive tension. Without adequate competition, achieving value for money and timely delivery becomes significantly more challenging.

Institutional Friction: Procurement, Programme Control, and Budgetary Pressure

The 2025 Spending Review pairs substantial capital investment with challenging departmental efficiency targets, creating a complex delivery landscape:

Administration budget cuts: All departments must achieve a 16% real-terms reduction by 2029–30. The Department for Levelling Up, Housing and Communities (DLUHC), central to delivering housing and local regeneration, faces a particularly tough 15% real-terms cut over five years (averaging 1.4% per annum). This raises concerns about maintaining delivery momentum amid reduced internal resources.^[11]

DEFRA efficiency demands: The Department for Environment, Food & Rural Affairs (DEFRA), responsible for crucial water, flood-risk, and environmental infrastructure, is tasked with generating £144 million of savings via enhanced digital capability and reduced external contracting. While promising cost reductions, this shift requires substantial internal capability-building, which carries inherent delivery risk.^[12]

Over a five-year commission, G&T helped the Animal and Plant Health Agency (APHA)—a DEFRA executive agency—improve capital delivery and maintain vital biosecurity infrastructure, even amid challenges such as COVID-19. With DEFRA now facing similar pressures from tight budgets, digital demands, and expanded responsibilities, G&T would recommend a targeted investment approach, phased ELMS rollout, streamlined regulation and stronger local partnerships. Robust project and change management, supported by clear performance metrics, will be critical to managing delivery risk and safeguarding the UK’s environmental and biosecurity resilience.

At the same time, despite efforts to streamline, procurement reform remains slow. Many projects are still driven by budget-first tendering and fragmented commissioning structures. This often undermines long-term value, innovation, and sustainability and inadvertently discourages necessary investments in workforce training, technology adoption, and collaborative contracting—ultimately restricting supply-chain engagement and limiting project outcomes.

Encouragingly, private investment is re-entering the infrastructure conversation, notably in the energy and digital sectors. However, new public-private partnerships (PPPs) face stringent criteria around genuine risk transfer, revenue certainty, and demonstrable public value—lessons drawn from legacy PFI/PPP shortcomings. Emerging approaches, such as Regulated Asset Base (RAB) models and public-private joint ventures, could strike a more sustainable balance, attracting investment while maintaining accountability.

Critically, the absence of integrated, cross-government programme governance poses a structural risk. Infrastructure schemes are increasingly interdependent, complex and multi-sectoral, yet siloed commissioning persists. Without a coherent delivery framework ensuring cross-departmental alignment, the Government risks eroding both market confidence and its overall capacity to deliver complex programmes effectively and efficiently.

Supporting Public Sector Delivery: G&T’s Approach

The 2025 Spending Review sets out significant ambitions for investment in infrastructure, public services and housing—but also highlights the growing scrutiny on delivery performance, value for money and long-term impact.

At G&T, we work with public-sector clients to help bridge the gap between funding commitments and effective delivery. We understand the challenges of mobilising complex programmes within tight timeframes and under close financial and public scrutiny. Our role is to bring clarity, governance and commercial rigour to delivery—ensuring that projects progress with confidence and that investment translates into real-world outcomes.

We have worked on major public programmes across healthcare, transport, education, energy, housing and regeneration—helping clients establish effective delivery structures, manage risk and optimise value from early stage to completion. This includes:

Mobilising large-scale delivery programmes, including governance frameworks and risk management approaches
Applying real-time programme controls and commercial intelligence to improve delivery certainty and inform better decisions
Integrating life-cycle costing and carbon assessment to align delivery with long-term financial and sustainability goals
Advising on procurement strategies and contract management to support robust, fair and efficient delivery

As infrastructure delivery becomes increasingly complex and accountable, we see our role as enabling public-sector clients to move forward with clarity—making informed choices that balance ambition with practical delivery.

Key considerations for clients planning for the Spending Review period:

How delivery structures can be set up from the outset to manage complexity and risk
Where programme controls and data can be used to improve visibility and decision-making
How procurement and contracting strategies can support value for money and fair outcomes
How delivery can align with wider policy goals—from sustainability to regional growth

By combining delivery intelligence, sector expertise and hands-on experience, we help public-sector clients translate ambition into sustainable outcomes that endure long after completion.

Conclusion: From Capital Commitment to Delivery Confidence

The 2025 Spending Review is more than a fiscal event - it is a statement of national ambition. Yet without delivery reform, that ambition risks dilution. Underperformance no longer reflects solely on departments—it carries political and economic consequences, undermining market confidence and public trust.

G&T offers the strategic capability, commercial insight, and delivery assurance needed to turn capital commitments into visible results. With the right partners in place, the UK can translate political will into lasting public value.