The UK in 2025: Tax rises, AI innovation, and Energy Security

As we enter 2025, Prime Minister Starmer has vowed to make good on his election manifesto pledge and “fight for change” in the UK - but with the possibility of further tax rises, a drop in business confidence, and growing pressure from trade unions, many in the UK are now questioning whether Labour’s “changes” will be for the better. However, with some historic new bills due to make their way through Parliament and Labour’s promise to make the UK an AI hotspot, 2025 still has a lot in store for many in the UK. Here’s what to look out for this year: 

Employment Rights Bill

In October, the Government introduced its landmark Employment Rights Bill to Parliament. Among other things, the Bill would end “exploitative” zero-hour contracts, protect pregnant women and mothers, remove age bands from the Minimum Wage, remove the qualifying period for unfair dismissal, and ban “fire and rehire” practices. While the Bill has been welcomed by many as it progresses through Parliament, others worry about what it might mean for businesses. If the Bill passes, it might cost businesses up to £5bn a year to implement, according to the government's own analysis. 

In 2025, Keir Starmer will be fighting on all fronts as business leaders implore him to water down the planned improvements to worker’s rights, and the TUC and other unions pushes the Prime Minister to “stick to his guns”. Starmer already appears to be feeling the pressure from businesses, as his Government announced in January that they would be seeking compromises on parts of the landmark Bill to “remove obstacles to economic growth”. One area the Government seems prepared to compromise on is redundancy, with ministers looking at changing the Bill to ensure big employers do not have to consult workers on redundancies at different sites if they are unrelated. While Starmer seems intent on staying firm on the more substantial provisions in the Bill, only time will tell if pressure from business groups will have him rethinking Labour’s plan to “Make Work Pay”.

Assisted Dying Bill

In 2024, Kim Leadbeater put forward a Private Member’s Bill (PMB) that caused much controversy. Her Terminally Ill Adults (End of Life) PMB proposes terminally ill people in England and Wales should have the right to choose to end their life. The Bill has reached the Committee Stage in the House of Commons and, so far, we’ve seen the emergence of some deep-seated disagreement within parties and between ministers due to the nature of the Bill. These divisions are present too at the highest levels of government, with Health Secretary Wes Streeting vocalising his opposition to the Bill while Prime Minister Starmer has previously advocated for a change in law. In 2025, we’ll also see the House of Lords make their voices heard. Peers will go through the Bill with a fine-tooth comb, carefully analysing the strength and effectiveness of key points, including proposed safeguards. 

Tax Rises?

In her 2025 Budget, Rachel Reeves announced a sweeping package of tax increases to address what the Chancellor called a “black hole” in the public finances and fund essential public services. The £40 billion in tax rises was directed mainly at businesses, who will likely feel the hit as we enter 2025. With businesses still reeling, this knock to business confidence could have more detrimental and long-lasting effects on economic growth than the tax increases. As experts expect growth to undershoot the government’s 2025 forecast, it’s likely so too will tax receipts. Does this mean Rachel Reeves will be forced to increase taxes again before the next general election, despite her claims against another rise? Even if Reeves doesn’t end up announcing any further tax rises, ongoing speculation may still damage political confidence - not just economic. 

Tech

Although the recent budget announcement may have dented business confidence, Starmer is doing everything he can to demonstrate that the UK remains on a path towards growth. For the Prime Minister, the UK’s growth trajectory requires investment in AI - which he insists will be used to “turn around” the economy and public services. Starmer’s January 2025 promise to make the UK the “best place to start and scale an AI business” should be good news to the tech sector - but will Labour struggle just as the Conservatives did to balance innovation with regulation? Regulators will reportedly be told to “actively support innovation”, but with the Government announcing that anonymised NHS data will be made available to “researchers and innovators” to train AI models, many are questioning if an innovation duty will prevent regulators from properly safeguarding the public. With many of Labour’s own supporters remaining sceptical of AI, the question remains - how will the Government win around naysayers and see its plan for AI through to completion and unlock its full potential? Likewise, how will the Government find the balance between powering up innovation while maintaining public confidence that their needs and concerns are protected? 

Great British Energy

The Great British Energy (GBE) Bill was announced in the King’s Speech in the summer and cemented in legislation by Labour’s commitment to establish Great British Energy—a new, publicly owned, green energy company. While Labour promises the scheme will help crowd private capital into the sector and save customers £300 a year on energy bills by the end of the decade, many Conservatives need some convincing, claiming these “false promises” haven’t got the figures to back them up. A key challenge for the Energy Secretary Ed Miliband will be managing expectations around short-term achievements while advocating for the project’s long-term benefits. While it may be some time before Labour is able to make the UK a “clean energy superpower”, how they cope with the initial challenge of dealing with planning system constraints may be an indication of what’s to come.