The chancellor has announced more public spending on health and defence, as well as a boost for the British Business Bank. The commitments could give confidence to the pension investors in the Mansion House Accord who have committed to allocating 5% to UK private markets – contingent on there being a pipeline of suitable assets.  

In Wednesday’s Spending Review, Rachel Reeves set out large spending commitments to social and affordable housing, defence and the NHS, potentially paving the way for projects which would allow private capital to be invested alongside.  

A 10-year infrastructure strategy that the Treasury previously said would be published in parallel with the Spending Review will come “in the weeks ahead”, the chancellor remarked in her speech on Wednesday. Among others, the strategy will define how projects will be prioritised and the approach taken to provide certainty to industry.
 

    

However, Reeves committed £22.6bn per year for research and development by 2029‑30, “in support of the government’s forthcoming modern Industrial Strategy”. 

In addition, Reeves is increasing the British Business Bank’s financial capacity to £25.6bn, “supporting a two-thirds increase in support for UK innovative businesses compared to 2025-26 and crowding in tens of billions of pounds more in private capital”. 

The Treasury expects this will take BBB investments to around £2.5bn a year. 

In addition, while the Foreign, Commonwealth and Development Office is confronted with cuts, the government said it is “strengthening links with the financial sector and international partners to mobilise private capital for development and climate goals”. 

The Pensions and Lifetime Savings Association’s director of policy and advocacy, Zoe Alexander, said the announced spending would be welcomed by pension fund trustees, who will now weigh up the opportunities this presents.  

The PLSA’s report, ‘Creating a pipeline of investable UK opportunities’ argued that the government should increase the firepower of the BBB and the NWF.  

“Increasing the amount of capital the British Business Bank and the National Wealth Fund have at their disposal will improve the funding environment for promising start-ups and provide more seed capital for crowding in private investment to fund things like clean energy projects, infrastructure and other potential growth areas of the economy,” said Alexander.  

Additional funding for R&D, defence and infrastructure means companies in these sectors “are the sorts of opportunities DC schemes will be increasingly looking for following the ambition set by the Mansion House Accord”, she said, noting that some of the start-ups that receive funding from the BBB today could become candidates for scale-up capital from pension funds as they mature. 
   

   

Chris Austin, deputy chair of the Society of Pension Professionals Investment Committee, said investing more in UK productive assets can only happen where there are sufficient investible projects. 
 

“Yesterday’s spending review promised considerable investment across numerous vital areas of the economy from defence and infrastructure to healthcare, housing and education – offering a good indication as to the government’s policy intent. The pensions industry will need to decide if this public investment will create sufficient additional opportunities for them to invest in, but we are at least moving in the right direction,” said Austin. 

The insurance industry also has views on the spending decisions made by the government.

The director general of the Association of British Insurers, Hannah Gurga, said: “The funding marked for flood defences in today's Review is a welcome step towards climate adaptation, but to build real, lasting resilience it must sit within a clear, long-term framework. We want to see this outlined in the forthcoming 10-Year Infrastructure Strategy.”  

The spending announced on Wednesday has reignited speculation that the Treasury will need to look at increasing taxes at this year’s Autumn Budget, and some fear pensions could again be on the radar following the research paper into cutting reliefs for salary sacrifice arrangements.  

Possible changes to pensions tax relief "are unlikely to lead to the savings that some have suggested and may end up costing more in the long term”, argued the SPP’s Tax Group chair, Steve Hitchiner.  

The SPP has been vocal about opposing potential reduction in salary sacrifice relief. Hitchiner thinks changing pensions tax relief will lead to disruption for savers, employers, the pensions industry and the UK economy, adding: “Changes are also likely to give rise to numerous unintended consequences, not least a reduction in saving for retirement at a time when so many are not saving enough.”