This year’s Spring Statement was overtaken by events in the Middle East, with the US and Israel having launched their attacks on Iran just three days before. The low-key statement was delivered by the Chancellor of the Exchequer, Rachel Reeves, on 3 March, with no major new announcements. The main UK Budget is now delivered in the Autumn, with the Spring Statement used solely to provide an economic update.
The already outdated forecasts for the UK economy, provided by the OBR (Office for Budget Responsibility), were as follows:
• Predicted UK economic growth for 2026 downgraded from 1.4% to 1.1%.
• Predicted growth for 2027 and 2028 marginally increased from 1.5% to 1.6%.
• UK unemployment forecast to increase to 5.2% this year, before gradually falling to 4.1% by 2030.
• Inflation projected to reduce to the target rate of 2% in 2027.
Both inflation and interest rates had been widely expected to fall over 2026, but the economic impact of the Middle East conflict now means the opposite is more likely. The Bank of England chose to maintain the current base rate of 3.75% at its meeting on 19 March, but now predicts inflation could increase back up to 3.5% over the coming months. The Bank confirmed their expectation that “the impact will be greater the longer the war and its effect on the global energy supply goes on”.
This article is for information only and should not be construed as advice or a recommendation. You should always seek independent financial advice prior to taking any action.
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