Chancellor Rachel Reeves’ Spring Statement on 26 March was overshadowed by a disappointing growth forecast from the Office of Budget Responsibility (OBR), and concerns over ongoing pressures on the UK economy.
The Spring Statement is not a ‘Budget,’ but is an opportunity for the OBR, a public body funded by the Treasury, to deliver its independent forecasts for UK economic growth. Back in October 2024, the OBR had expected UK gross domestic product (GDP) to grow by 2% in 2025. However, Rachel Reeves announced in her Statement that the OBR’s forecast had been halved to 1%. While noting she was “not satisfied” with the numbers, Rachel Reeves confirmed the downgrade was due to “increased global uncertainty.”
Meanwhile, UK inflation, which dropped to 2.8% in February, is expected to edge up to 3.2% this year, according to the OBR, before declining to 2.1% in 2026 and reaching the Bank of England’s target of 2% from 2027 onwards.
The OBR estimates that recently announced policy changes, including welfare reforms and day-to-day departmental spending cuts, will save £4.8bn from the public purse, and will restore in full the government’s planned headroom, with a £9.9bn surplus expected in 2029/30.
Quilter’s Investment Strategist Lindsay James commented, “Ultimately, this was a Spring Statement that could have been a lot worse for the UK economy. Labour has perhaps learned its lesson that the economy requires a more positive tone from government, and that the burden placed upon businesses at the Budget was enough for now.”