The Treasury and the Chancellor had specifically trailed the Spring Statement as being nothing more than the announcement of the Office for Budget Responsibility’s (OBR) latest forecast and the government’s view of the implications for its stated economic policy objectives.

The outcome was neatly summed up by the Institute for Fiscal Studies (IFS): “Today’s Spring Forecast did what it said on the tin . . . there was blissfully little speculation, and no tweaking tax or spending policies on the day. To her credit, she stayed her hand. Today we just got a forecast. We shouldn’t let the boringness of today overshadow the bigger picture which is that there’s still lots of work to do with the public finances.”

The areas where that work needs doing are all too clear from the detail of the OBR forecast, although the economic indicators are mixed overall:

GDP growth

• 2026: growth of 1.1%, down from 1.4% forecast in November 2025
• 2027: growth of 1.6%, up from 1.5%
• 2028: growth of 1.6%, up from 1.5%
• 2029: growth of 1.5%, unchanged
• 2030: growth of 1.5%

The long-term growth trend for the UK economy prior to the pandemic had been a little over 2%. So, the Chancellor is facing short term growth pain but better prospects thereafter, but all the while still falling behind past performance.

These growth forecasts are for absolute growth, rather than the more meaningful numbers (in terms of productivity) for GDP growth per capita. On this measure, the Chancellor revealed that GDP per person is set to grow by more than was expected last autumn, with overall growth of 5.6% predicted over the course of this parliament.

Unemployment

The OBR has raised its forecast for unemployment quite significantly. Its new central forecast is that the unemployment rate rises from 4.75% in 2025 to a peak of 5.3% in 2026. Back in November, unemployment had been expected to hit 4.9%, so this is quite an economic downgrade. It has also raised its forecast for unemployment in 2027 to 4.9%, from 4.6% before.

Inflation

Inflation is forecast to fall faster than previously thought, falling to 2.3% during 2026 before reaching the Bank of England’s target of 2% by the end of the year.

Borrowing

The OBR forecast shows that public sector net borrowing is set to drop from 4.3% of GDP in 2026 to 3.6% next year, then to 2.9%, 2.5% and to 1.8% in the 2029-30 financial year. Debt is now expected to be lower in every year of the forecast compared with last autumn.

Compliance with fiscal rules

The impact of weaker than expected growth has been more than balanced out by lower borrowing costs and a bigger tax take. The result is that the Chancellor’s fiscal wiggle room has increased from £21.7bn to £23.6bn, but even at that improved level, the amount by which her revenues are expected to exceed day-to-day public spending in a few years’ time, remains smaller than the historical average.

Unknown unknowns

There are two major areas of uncertainty, one flagged up by both the OBR and the Chancellor, the other ignored.

The Iran War

The forecasts do not allow for any potential impact from the jump in energy prices or other economic disruptions which may be triggered by the conflict in the Middle East. Nevertheless, the OBR says it “could have very significant impacts on the global and UK economies”.

The Chancellor said that easing cost of living pressures is a key objective for the government, but these efforts could be seriously disrupted by the Middle East conflict and the surge in oil and gas prices.

Immigration

Reduced immigration is highly likely to have a significant downward influence on UK GDP. The thinktank, British Future highlighted the conundrum this represents:

“Today’s OBR projections reveal two competing realities in government right now. The OBR and Treasury forecast an upturn in net migration, which makes their fiscal numbers add up – while the Home Office says it is determined to drive net migration down still further. They can’t have it both ways”.

Further concerns

It will remain to be seen what impact the OBR’s forecast and the Chancellor’s comments will have on interest rate cut hopes. Financial markets have already substantially reduced their prediction from near certainty to no more than 50:50 odds on a cut at the forthcoming Bank of England MPC meeting later this month.

As always since the Truss mini-Budget debacle, the government is watching the bond markets’ reactions warily. The initial movements have been unfavourable, but not significantly so. In any case, disentangling the Spring Statement from the Middle East crisis as the cause is extremely difficult.

The final major concern must be what effect the Statement may have on two crucial economic factors: consumer confidence as it effects spending in the vital service sector and business confidence as it might drive a much-needed boost to business investment and therefore to productivity.