The U.K.’s Finance Minister Rachel Reeves has delivered her latest update on the state of the U.K. economy and public finances, with the chancellor having to concede that growth will be lower than previously expected this year.
Addressing the House of Commons on Tuesday, Reeves said “the government has the right economic plan for the country,” which was met by immediate jeers from opposition lawmakers.
A plan, she said, that was “even more important in a world that, over the last few days, has become yet more uncertain,” amid the escalating conflict in the Middle East.
Economists hadn’t expected dramatic revisions so soon after the chancellor’s Autumn Budget, the government’s main fiscal event where it presents its major spending and taxation plans for the year ahead.
“Big picture, we’re not expecting any fireworks,” Sanjay Raja, chief U.K. economist at Deutsche Bank, had said ahead of the spring budget update
The government had already signalled that it is prioritizing the annual Autumn Budget later in the year as its main fiscal placeholder, insisting this would be beneficial to households and businesses. “Stability is the single most important pre-condition for economic growth,” Reeves said Tuesday.
She said the government had restored economic stability to the U.K., noting: “Inflation is down, borrowing is down, living standards are up and the economy is growing.”
The U.K. economy grew a meager 0.1% in the fourth quarter, according to preliminary figures released in February by the Office for National Statistics.
U.K. Chancellor of the Exchequer Rachel Reeves departs No.11 Downing Street to present the government’s Spring Forecast to the House of Commons on March 3, 2026 in London, England.
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In November, Chancellor Reeves said the Spring Statement would include an “interim update on the economy and public finances” from the independent public finances watchdog, the Office for Budget Responsibility (OBR), but there would be no policy changes unless there is “a significant change to the economic outlook that requires a response.”
“With the Autumn Budget taking place only three months ago, we see very little in any new information” that could be presented in the 2026 Spring Statement, Raja said, noting that “much has been done to downplay” it.
Reeves was widely expected to emphasize that her previously unveiled plans, including unpopular tax rises on business and big infrastructure and defense spending, were starting to bear fruit for the public finances.
Reeves said the government was “delivering the biggest uplift in defense spending since the Cold War” and that she was in no doubt that the country could “navigate the challenges we face.”
“The plan that I have been driving forward since the election is the right one: Stability in our public finances, investment in our infrastructure and reform to Britain’s economy,” she said. Read the government’s release on the Spring Statement here.
Number crunching
As with the Autumn Budget, the Spring Statement is accompanied by the latest economic and fiscal outlook from the OBR, which assesses the government’s tax and spending plans.
Reeves said the OBR had lowered its inflation outlook for the U.K. and had updated its growth forecasts, which were released after her speech ended.
She said the OBR now forecasts growth of 1.1% in 2026 (down from the November forecast of 1.4%) but had slightly increased its 2027 and 2028 forecasts to 1.6%. The U.K. economy is expected to grow 1.5% in 2029 and 2030, respectively, and remains unchanged from the November prediction.
The OBR is responsible for assessing whether the chancellor is on course to meet her “fiscal rules” on spending, borrowing and lowering debt, but while it would usually assess this at the time of both the Autumn and Spring Statements, it will now only give its assessment of the fiscal rules in the fall.
Reeves said the OBR now expected the government to borrow £18 billion ($23.97 billion) less than it had expected in November.
The OBR’s economic and fiscal outlook (EFO), published after Reeves finished her statement to lawmakers, confirmed the forecasts.
The EFO acknowledged that the forecasts were “little changed” but that the “fiscal context remains challenging.”
“Government debt as a share of GDP has nearly tripled over two decades, borrowing has remained around 5 percent of GDP for the past four years, and borrowing costs are among the highest of advanced economies,” the OBR noted.
“Against this challenging backdrop this interim forecast update is little changed from November. GDP growth averages 1½ percent from next year and borrowing falls to around 1½ percent of GDP in 2030-31, which would stabilise debt around 95 percent of GDP.”
Still, it noted, “Significant risks, including from conflict in the Middle East, mean outcomes both substantially above and below this forecast are possible.”
Analysts were keeping an eye on how much fiscal “headroom” Reeves has to meet her fiscal rules, given major public spending initiatives and U-turns on cost-cutting measures in recent months.
Reeves said she was on target to meet her main borrowing target by 2029/2030 with £23.6 billion to spare, that was up from £21.7 billion in the fall.
Britain’s Chancellor of the Exchequer Rachel Reeves (R) stands with Britain’s Prime Minister Keir Starmer (L) as she is applauded after delivering her speech on the second day of the annual Labour Party conference in Liverpool, north-west England, on September 29, 2025.
Oli Scarff | Afp | Getty Images
Reeves and the ruling Labour Party were wary of announcing anything that could upset consumers or businesses at a time when the party is struggling in opinion polls ahead of nationwide local elections in May, the next electoral test ahead of a general election, which has to take place by 2029.