The Department for Environment, Food and Rural Affairs (Defra) is set to receive total funding of £7.4 billion in 2028-29 under the Spending Review (SR) plans outlined yesterday by Chancellor Rachel Reeves.

Over the total SR period, Defra will receive £16 billion of capital funding, equivalent to an annual average real terms growth rate of 2.5%.

The settlement also commits £4.2 billion in Total Departmental Expenditure Limit (TDEL) over three years (2026-27 to 2028-29) to build and maintain flood defences, protecting communities across England from the dangers of flooding.

Defra will invest over £300 million TDEL between 2026-27 and 2028-29 into programmes to improve services, deliver better outcomes and reduce costs by:

• Addressing historic legacy IT challenges in order to reduce the risk of system failures and cyber-attacks, and move towards a modern, fit-for-purpose, resilient and secure core technology system;
• Transforming the Environment Agency’s digital systems to lower costs and improve customer services for businesses and developers; and
• Investing in AI-enabled improvements to reduce the costs of regulation, improve the management of disease risks and streamline the delivery of grants.

Farming to get £2.7 billion plus per year from 2026-27 until 2028-29

In farming, the government will invest more than £2.7 billion per year in sustainable farming and nature recovery from 2026-27 until 2028-29. Farmers will benefit from an average of £2.3 billion through the Farming and Countryside Programme and up to £400 million from additional nature schemes.

The settlement includes increasing support for nature-friendly farming through Environmental Land Management schemes from £800 million in 2023-24 to £2 billion by 2028-29, sustained by rapidly winding down subsidy payments that do not provide a return on investment. This is expected to make a significant contribution to the Environment Act targets, including improving the quality of water, air, and spaces for wildlife so biodiversity can thrive.

Defra has committed to delivering at least 5% savings and efficiencies over Phase 2 of the SR period. This includes savings identified through the zero-based review (ZBR), including increasing in-house digital expertise to reduce spend on contractors. It has also worked with the Treasury’s Office for Value for Money (OVfM) to identify £144 million of technical efficiencies by 2028-29.

Climate resilience

The Chancellor also highlights climate resilience as a key feature of the Spending Review, saying the government is fully committed to meeting its legally binding carbon budgets and to reaching net zero by 2050. The government will set out further details in its Carbon Budget and Growth Delivery Plan in October, including its plans to decarbonise industry.

Rachel Reeves says the SR supports the Plan for Change commitment to accelerate to net zero while driving growth, including by:

• Allocating £9.4 billion to Carbon Capture, Usage and Storage (CCUS) over the SR period. The government’s support will attract private investment and support thousands of jobs across the supply chain;
• Committing £2.6 billion capital investment to decarbonise transport from 2026-27 to 2029-30 - includes £1.4 billion to support the continued uptake of electric vehicles, including vans and HGVs, and £400 million to support the rollout of charging infrastructure.

The government’s Clean Energy Industries and Advanced Manufacturing sector plans, to be published as part of the Industrial Strategy later in June, will set out how the government will capture the growth benefits from sectors driving the net zero transition.

The Chancellor says the government is also investing in climate adaptation and the natural environment to increase the UK’s resilience to the effects of climate change and to protect the ecosystems that underpin the economy and food security, including the £2.7 billion-plus spend per annum in sustainable farming and nature’s recovery until 2028-29.

 The settlement is committing £4.2 billion in Total Departmental Expenditure Limit (TDEL) over three years (2026-27 to 2028-29) to build and maintain flood defences, protecting communities across England from the dangers of flooding.

Spending Review - provisions for infrastructure investment welcomed by industry

The provisions outlined by the Chancellor for increased investment in infrastructure in yesterday’s Spending Review have been broadly welcomed across industry.

Commenting in response, Institution of Civil Engineers director general Dr Janet Young said:

“The ICE welcomes the clear strategic direction for infrastructure outlined in today’s spending review, which echoes the ICE’s and wider industry’s call for a stable policy environment and long-term commitment to investment.

“Whether it’s through providing better public transport, increasing energy security while decreasing carbon emissions, or by designing roads, sewers and other systems to support growing communities, infrastructure is essential for the UK to meet its economic, social, and environmental goals.

“It’s encouraging to see commitments from the government to improve energy efficiency by upgrading homes, improve transport links in the North and Midlands, and to fund flood defences.

“Of course, more detail is still needed, specifically on how the government will ensure the UK’s infrastrcture is ready for the impact of climate change.

“We look forward to learning how the government plans to deliver the infrastructure the UK needs in its forthcoming 10 Year Infrastructure Strategy and supporting its delivery.”

AtkinsRéalis has likewise welcomed the funding announcements as creating the building blocks to crowd in finance, shift to delivery faster, and kickstart growth.

Chris Ball, President – UK & Ireland, AtkinsRéalis, said:

“There is much to welcome in the Spending Review, including further investment in vital transport links, affordable homes and new nuclear, and a strong desire to shift swiftly into project delivery phase to unlock opportunities and deliver place-based growth.

“We also support the objectives that sit behind the investment plans published by Government. Infrastructure investment has always been a catalyst for growth and opportunity, but the funding plans today support a clear mission: improve regional connectivity, strengthen energy security, accelerate the build rate of affordable homes and boost socio-economic opportunities.

“Many of the funding decisions made today will kickstart growth and underpin broader programmes of renewal, including the trailblazer investment deals, and we welcome the Green Book Review towards place-based business cases that articulate the full economic value of a far broader array of projects.”

He went on to say private finance will be pivotal in funding new homes, new transport links, city regeneration programmes and critical national infrastructure.

Chris Ball continued:

“Attracting this investment relies on stability, certainty and credibility of plans. A shift towards a streamlined planning system will support this, alongside the long-term certainty that the impending Infrastructure and Industrial Strategies should provide, and the frameworks to fund and structure projects effectively. There is also a clear role for industry to help create viable plans for deliverable projects, building a better business case that delivers the right outcomes for all parties.”

Spending Review creates certainty for infrastructure investment

Rachel Ellison, advisory and programme development managing director for UK and Europe at Mott MacDonald, said the plans to spend £113 billion on infrastructure provides certainty to the construction industry, commenting:

“This commitment, along with the 10-Year Infrastructure Strategy that we expect to see published later this month, delivers a strong pipeline of work that will allow us to invest in innovations and the careers of the people who will deliver this work.

“As an industry, we now have the opportunity to work together to effectively deliver these programmes, projects and interventions as part of an integrated strategy giving the public confidence in our ability to deliver the expected outcomes.”

Mott MacDonald water and environment managing director for UK & Europe Tim Hill urged for climate resilience to be baked into the planned infrastructure investments:

“The spending plans announced today represent a significant opportunity to deliver differently and ensure climate resilience is built into everything we do. This approach will maximise the benefits for society but achieving that will require a more strategic, systems thinking approach than ever before.

“As an example of the change needed, we must move away from projects like sustainable drainage being planned on a site-by-site basis, to a more regional, catchment-level scale to create the biggest benefit in terms of resilience. Investment must be driven by greatest whole life value to society and not just at lowest capital cost.”