UK Spring Statement 2026: the calm in the storm

The Chancellor delivered the UK’s Spring Statement, presenting an update on the state of the economy alongside the latest forecasts from the Office for Budget Responsibility (OBR). As widely expected in advance, the statement was deliberately low‑key, with no major new tax or spending measures announced, reflecting the government’s commitment to making the Autumn Budget its single main fiscal event each year.

Focus on forecasts, not new policies

Rather than introducing fresh policy changes, the Spring Statement focused on how the economy is performing under measures already announced. This approach had been clearly signalled beforehand, and any “headline” announcements had largely been ruled out. That expectation proved accurate, helping to avoid market uncertainty and reinforcing the government’s emphasis on stability and predictability.

Key takeaways from the forecasts

Economic growth revised down for 2026

The OBR revised its GDP growth forecast for 2026 down to 1.1%, from 1.4% forecast at the Autumn Budget in November. The downgrade reflects weaker economic momentum at the end of 2025, lower net migration, and a softening labour market. However, growth forecasts for later years were slightly upgraded, with growth of 1.6% expected in 2027 and 2028, and 1.5% in 2029 and 2030, leaving average growth across the period broadly unchanged

Inflation and borrowing moving in the right direction

The OBR now expects inflation to fall to 2.3% in 2026, reaching the Bank of England’s 2% target from 2027 onwards. Government borrowing is also forecast to be around £18 billion lower than expected at the time of the Autumn Budget, helped by stronger tax receipts earlier in the year and lower debt interest costs.

Labour market pressures remain

Despite improving inflation, the labour market outlook remains challenging. Unemployment is forecast to increase from 4.75% peaking at around 5.3% in 2026, higher than previously expected, before gradually falling to around 4.1% by the end of the decade. The OBR noted that younger people and new labour market entrants are likely to be most affected.

Cost of living and external risks

The Chancellor reiterated that, after accounting for inflation, households are forecast to be over £1,000 a year better off by the next election, supported by falling inflation and earlier interest rate cuts.

However, both the government and the OBR acknowledged growing external risks, particularly from rising energy prices linked to escalating conflict in the Middle East, which were not fully reflected in the forecasts.

In summary

Overall, the Spring Statement delivered exactly what had been expected: a technical economic update rather than a policy‑changing event. While growth prospects for 2026 have weakened slightly, improvements in inflation and borrowing offer some reassurance. For households and businesses, the key message is continuity — with major fiscal decisions deferred to the Autumn Budget later in the year.  However recent geopolitical developments introduce fresh uncertainty around the inflation path and growth outlook.