Chancellor Rachel Reeves delivered the Spring Statement last week, providing an update on the UK economy and the government’s public finances.
The government has been clear that it intends to move towards a single major fiscal event each year, with the Budget acting as the primary moment for tax announcements. As a result, the Spring Statement was positioned largely as an economic update rather than a platform for significant tax changes.
While the Chancellor did not introduce major new tax measures, the Statement still offered insight into how the government believes the economy is performing and the challenges that lie ahead.
Much of the speech focused on the government’s wider economic strategy. The Chancellor argued that current policies are beginning to show results, pointing to falling inflation, improving investment levels and a reduction in borrowing compared with earlier forecasts.
According to updated projections from the Office for Budget Responsibility (OBR), borrowing is now expected to be nearly £18 billion lower than forecast in the autumn, with borrowing this year projected to be the lowest seen in six years. Inflation is also expected to continue easing, while investment levels across the economy are predicted to rise.
The government also highlighted expectations for economic growth over the course of the current parliament, with GDP per person forecast to grow by 5.6% over that period.
However, the OBR’s broader outlook suggests that economic conditions may remain challenging in the years ahead.
In its latest report, the OBR forecasts that UK GDP growth will slow to around 1.1% in 2026 before averaging approximately 1.6% over the following five years. Inflation is expected to return to the government’s 2% target by late 2026, while wage growth is predicted to ease to around 3.5% in 2026 before settling closer to longer term averages.
The labour market may also face some pressure. Unemployment is forecast to rise slightly, reaching a peak of around 5.3% in 2026, driven largely by new entrants to the labour market finding it harder to secure work.
Public finances remain another key consideration. The OBR expects public sector borrowing to fall gradually over the coming years, declining from 5.2% of GDP in 2024/25 to around 1.6% by the end of the decade. At the same time, the tax burden is projected to continue rising, reaching an estimated 38% of GDP by 2030/31, which would represent a post-war high.
The report also highlights ongoing pressures on public spending and the potential for rising welfare costs, particularly linked to the continued growth in disability and health related claims since the pandemic.
As with any economic forecast, these projections remain subject to change. Global events, including ongoing geopolitical tensions and wider economic uncertainty, could still influence the outlook over the coming months.
Overall, the Spring Statement did not introduce major policy shifts, but it did provide a snapshot of an economy still navigating slow growth, tight public finances and continued pressure on government spending.
Read the full spring statement report here and keep an eye on our channels for expert guidance on what both people and businesses can be doing to capitalise on the statement contents.