Last week, outgoing prime minister Sir Kier Starmer announced extra funding for defence – a £15bn increase to £80bn a year by 2030, achieved by ‘cutting investment budgets in other areas’
The road and energy sectors will be directly affected.
If you’re wondering if that will impact your business, then read on for a quick rundown of the situation.
What areas of roads and energy are being cut?
On 30 June 2026, Chancellor Rachel Reeves confirmed that the Department for Transport (DfT) will provide savings of up to £700m from its roads funding to help fund the defence budget increase.
The government describes the goal as ‘moving towards war-fighting readiness, modernising military capability to fight the wars of the future, and driving economic growth’.
Here are the headline impacts as laid out in the Defence Investment Plan Funding explainer:
Roads
- DfT will provide savings of up to £700m from its roads funding.
- For perspective, this is a contraction of -0.1% rising to 0.8% of the sector’s overall budget over 4 years (2026-30).
- The Department will consult on reductions to RIS 3 – the third Road Investment Strategy (RIS3), including the potential cancellation of the A38 Derby Junctions and A46 Newark Bypass schemes (neither of these had entered contract, though there will be stakeholder consultations before any final decision is taken).
- The DfT will also explore limited reductions to as yet uncommitted roads funding. More to come.
- The government remains committed to protecting funding for local authorities to mend potholes and repair their roads, protecting investment in rail infrastructure, including Northern Powerhouse Rail.
Energy
- The Department for Energy Security and Net Zero (DESNZ) is also contributing. They’re required to find savings of £2bn over the next four years.
- In reality, this is a reduction in budget that begins at -0.1% and progresses to -2% by 2030.
- More detailed plans will be shared in the autumn, but the government remains, it says, committed to renewables. Notably, the UK holds the largest, or equal largest, under-construction offshore wind portfolio in the world, in line with China and ahead of the US. Renewables are widely cited as one of the fastest-growing sectors globally, typically ranked just behind AI.
- To keep up globally, the government’s stated intention is to maintain ‘the fastest-growing capital budget out of any department across this spending review period’ despite the cuts. Because: ‘Getting off fossil fuels is vital to our national security, safeguarding household, business and government finances’.
Beyond roads and energy, the spending increase includes funding from a 1% reduction across every department in the country. There’s also a plan to generate £0.4bn in income from rationalising the MOD estate.
How might these cuts impact the supply chain?
Details remain scarce, and strategic insights for supply chain leaders – other than seizing opportunities created by the defence sector – remain unclear.
Industry figures seem concerned, however. Despite the government’s announcement promising commitments to mending potholes and repairing roads, the Asphalt Industry Alliance’s chair pushed hard for the government to still honour its £7.3 billion commitment to prevent further decline across the network.
What is the wider plan, and why is it happening?
Nobody could have missed the rising aggression from Russia and unrest in the Middle East. These issues have led to promises of increased defence spending by multiple UK governments, including Sunak’s Conservatives in 2024.
At the July 2025 NATO summit, Starmer signed up to the new alliance-wide target of 3.5% of GDP on core defence by 2035 (plus 1.5% on broader security/resilience, totalling 5%).
The plans target a defence budget of £80bn a year by 2029. For perspective, the 2024/25 financial year saw the UK spend £60.2bn.
How infrastructure firms can protect margins when budgets tighten
Across highways, civils, utilities, and commercial landscaping, firms are facing a combination of tighter budgets, labour shortages, rising costs, and increasing expectations from clients and regulators.
Re-flow Field Management’s specialist software helps infrastructure businesses remove the operational inefficiencies that quietly erode profit margins every day. That means:
- Reduced administrative overhead.
- Prevention of costly rework and remedials and water-tight evidence to avoid disputes.
- More productivity without sacrificing compliance.
- Better decision-making through data visibility of site processes, quality, and KPIs.
Watch our free webinar to see how infrastructure firms are using the software to improve site visibility, reduce rework, strengthen compliance, and get more from their existing resources.
The post Funding cuts are coming for roads and energy – here’s what it really means appeared first on Planning, Building & Construction Today.
