Pathway Fund’s Response to Autumn Budget 2025
The Chancellor of the Exchequer, the Rt Hon. Rachel Reeves MP, has just delivered her second Autumn Budget.
Below, Pathway Fund provides an overview of the Budget’s key announcements and provides our view on where the Government could and should go, next.
An important Budget; one which shows this Government to be moving further forwards. Moving towards the impact economy. Moving towards place-based, inclusive, growth, for Black and Ethnically Minoritised (BEM) communities.
Pathway Fund welcomes the Government’s recognition as to the vital role that can be played by the impact economy, in 2025’s Autumn Budget. We believe that the impact economy represents a significant opportunity for this government, one that can support its desire to drive inclusive growth, national renewal, and public service reform. It’s excellent to see the Government emphasising that, through the new Office for the Impact Economy – and in-line with the Social Impact Investment Advisory Group's recommendations – the impact economy can and will be harnessed to drive forward its Pride in Place initiative, its early years and children’s social care work, as well as its 10-year, £500 million, Better Futures Fund.
As part of this, it is excellent to see the Government using entities like the British Business Bank (BBB) to deliver this agenda – whilst also beginning to think on how the pensions market, might be effectively utilised, too.
Indeed, the Government has committed £1.5 billion, to support mission-driven, place-based, growth. Within its plans to back business and unlock innovation, the Government has said that the BBB will develop a new Five-Year Strategic Plan, which will increase capital deployment from £1.5 billion to £2.5 billion a year. It will support BEM entrepreneurs, small businesses, and scale-up companies with its increased, permanent, financial capacity of £25.6 billion.
The BBB will – supporting the growth-driving work being undertaken by the National Wealth Fund – invest at least £5 billion in growth-stage funds and scale-up companies, and it will explore using its existing financial guarantee capacity to support IP-backed lending. Additionally, the BBB will develop ‘VentureLink’, an initiative which will help pension funds navigate the UK venture capital market. Finally, but importantly, the Government is making it simpler for entrepreneurs, to travel to and set-up, in the UK.
Unlocking the potential of impact capital, particularly through pension funds, can provide significant resources to support mission-driven enterprises and place-based growth. Now, however, Pathway Fund urges the Government to develop its commitments, in this respect, embedding racial equity at the heart of its work with the BBB and VentureLink, so as to ensure that we see these important, emerging, initiatives, within the impact economy, benefiting BEM communities, as they take shape.
Given Pathway Fund’s desire to catalyse the UK’s various regions, as detailed in its 2026 – 2029 strategy, we are also pleased to note the Government’s emphasis on regional regeneration.
Earlier this year, Pathway Fund carried out a regional listening series, across England: we witnessed the immense potential that exists within BEM communities, in every part of the country. We’ve documented that in our listening papers, too. It is encouraging, therefore, to see some £13 billion in government investment directed towards catalysing these regions, potentially supporting BEM-led entities, in turn.
£500 million will be provided to the Mayoral Revolving Growth Fund, which will see central government and mayors sharing risk, to overcome barriers in accessing finance, experienced in key city regions. Five pilots will be launch, in selected mayoral strategic authorities, to test how the pooling of public service budgets, in local areas, can unlock funding for the remedying of social issues. An additional £902 million will be allocated to the Local Growth Fund, which will see Greater Manchester, North East, West Midlands, South Yorkshire, West Yorkshire, Liverpool City Region, Greater Lincolnshire, Tees Valley, Hull & East Yorkshire, York & North Yorkshire, and the East Midlands, able to invest in growth-driving interventions. Both offer opportunities for us to grow the BEM-led impact economy, in the regions.
Following our series, we look forward to working with the nation’s combined authorities to see these measures benefit BEM communities. We, too, encourage Government to be honest in its diagnosing of inequity in the regions, with this Budget being light on the identification and remedying of racial inequity, in this context. Little mention is made, in this release, of the experiences currently faced by BEM communities, across the UK, at present; that needs to be righted, moving forwards.
Public service reform is another important element of the Budget. State efficiency is essential if we are to deliver inclusive growth. The recognition of the role that social impact investment, as a key limb of the impact economy, can play in this reform is particularly important. Harnessing both, to strengthen public services, offers a pathway to innovation and resilience, and we encourage the Government to ensure that BEM communities are central to these reforms, both as beneficiaries and as contributors.
Directly related to this, is the Government’s recognition of homelessness, child poverty, youth unemployment, and housing inequity, as urgent social issues that must be remedied.
We believe that there is opportunity for the impact economy to drive both public sector efficiency and social good, in these contexts, which is why it is welcome to have seen Government recognise the same. The Youth Guarantee, as well the Growth and Skills Levy, and moves towards increased capital spending, are steps in the right direction. But, addressing these challenges will require genuine partnership, public-private collaboration, and the crowding-in of investment to deliver sustainable solutions. We therefore look forward to the Office for Value of Money’s suggested review of government spending, in turn. We encourage the Government to ensure that it sees the return on investment offered by resilient BEM enterprise, as offering much, in that review process.
In that regard, we also encourage the Government to recognise the opportunity offered by organisations that seek to use employee ownership models, to drive inclusive growth – particularly those employing BEM colleagues. The Budget has imposed immediate Capital Gains Tax on the full value of sales to Employee Ownership Trusts, making it financially challenging for businesses to transition to employee ownership. To support BEM wealth building, we would suggest that the Government needs to consult, reconsider that decision, and improve its offer for employee-owned businesses.
Overall, however, this Budget reflects this Government’s continued support for Pathway Fund’s work, that of its partners, and the impact economy.
The Budget provides opportunity, for intentional, placed-based, racially equitable, growth; though, it will be incumbent upon this administration, Pathway, and our allies, to ensure that these new initiatives are designed with our communities, in mind. It is our intention that they are so. And we will work until we see that, indeed, achieved.
If you have any thoughts or questions on the Budget, then please do email us at: impact@pathwayfund.org.uk .