Spring Statement 2026

Spring Statement

This afternoon the Chancellor, Rachel Reeves, delivered her second Spring Statement to the
House of Commons, where she responded to the forecasts on the UK economy and its
fiscal position. Amid continued conflict in the Middle East, Reeves told MPs that her plan is
“even more important” in a “yet more uncertain” world.

In the run up to this year’s Spring Statement the Government received some mixed economic
news. Last month the Office for National Statistics (ONS) confirmed that the Government
recorded a public sector net borrowing surplus of £30.4 billion in January (the highest for any
month since records began in 1993), inflation dropped to 3%, and UK gilt yields have continued
to fall – easing borrowing costs. On the flip side, unemployment reached 5.2% in the three
months to December (2025), anaemic GDP growth of 0.1% was registered over the same
period and wage growth has started to slow.

Whether by design, from a Chancellor seeking to avoid the controversy of the Autumn Budget
or reflecting its reduced stature (the OBR no longer provides an assessment at the Spring
Statement of whether the Government is likely to meet its tax and spending rules), the
statement was billed a low-key affair, lasting less than thirty minutes.

Our Analysis

The Chancellor struck a confident and optimistic tone in today’s statement, drawing support
from relatively positive OBR forecasts which incorporate policy adjustments made since the
Budget, including changes to inheritance tax for farms, extended business rates relief for pubs
and additional funding for SEND provision.

Although billed as a lower-key fiscal event, the Chancellor used the platform to sharpen political
dividing lines. She criticised the Conservatives’ economic record in office, characterised Reform as closely aligned with the Conservatives, highlighted Liberal Democrat opposition to planning
reform and challenged elements of the Green Party’s foreign policy stance.

As anticipated, no new policy measures were announced. The focus was instead on reinforcing
the message that the UK’s fiscal position has stabilised and that the economy is improving.
However, her explicit references to defence spending, alongside a planned meeting with North
Sea oil and gas executives, merit attention. These signals may indicate potential movement in
two areas of relevance to financial services: further commitments on defence expenditure and a
possible recalibration of the Energy Profits Levy and future oil and gas licensing.

Security, economic stability, and growth were consistent themes. Despite the OBR revising
down growth projections for 2026, the Chancellor reiterated the Government’s ambition for
households to be £1,000 better off by the end of this Parliament. This aligns with the
Government’s broader political objective of addressing cost of living pressures ahead of the
next general election cycle.

The problem with this political strategy is that it has the potential to run the risk of going against
voter sentiment – where the public simply aren’t feeling any better off as a result of the
decisions taken by the Government and being told that they are tends to cause further
alienation. Recent events in the US demonstrate the challenges governments face when
macroeconomic indicators improve but public sentiment lags behind – for example, when
President Biden was plagued by an ‘affordability’ crisis in the run up to the 2024 election and his
administration’s response to it was much maligned.

While borrowing figures have improved, weaker growth forecasts and ongoing geopolitical
uncertainty continue to present headwinds. Developments in the Middle East, in particular,
create downside risks, including the potential for higher household energy costs should LNG
supply chains be disrupted. In this context, opposition pressure on the Government to
reconsider the planned September fuel duty rise is likely to intensify.

Looking ahead, the Chancellor’s fiscal strategy will remain exposed to both domestic political
pressures and external economic shocks.