For a fiscal event that isn’t a Budget yet sets the tone for the UK’s economic outlook, today’s Spring Statement has arrived with remarkably little drama. But what really lies ahead for the economy? Given recent geopolitical instability in the Gulf, today’s announcements must be taken in context.
Positioned firmly as a forecast update rather than a policy platform, the Chancellor’s speech was never expected to deliver major tax or spending changes. Instead, attention has centred on the latest projections from the Office for Budget Responsibility. Critically, on what they reveal about growth momentum, inflation persistence, borrowing trajectories and the government’s fiscal headroom.
For investment managers, the real significance lies less in rhetoric and more in the numbers. Updated assumptions on GDP, wage growth and gilt issuance feed directly into asset allocation decisions, rate expectations and sterling sensitivity.
We now know that the OBR has downgraded growth for the UK economy to 1.1% in 2026, 1.6% in both 2027 and 2028, and 1.5% in both 2029 and 2030.
Yet even as the Chancellor addressed the Commons, the global backdrop has shifted. Escalating tensions in the Middle East have already prompted sharp moves in energy markets, with gas prices responding quickly to heightened geopolitical risk. While it is too early to draw firm conclusions, the prospect of renewed inflationary pressure, at a time when markets are recalibrating expectations for rate cuts, cannot be ignored.
Importantly, these developments will not have been factored into today’s OBR forecasts nor the Spring Statement. If sustained, they risk complicating both the inflation trajectory and the government’s fiscal arithmetic in the months ahead.
Against this evolving macro landscape, what should investment managers take from today’s Spring Statement? Industry experts share their initial reactions below.
Lindsay James, Investment Strategist at Quilter, said:
“The Spring Statement should have been a non-event, used primarily as a source of political capital by Rachel Reeves. She did indeed share OBR forecasts that predicted improving headroom against fiscal rules, marginally lower inflation in coming years, lower gilt yields and lower interest rates. However, given events unfolding in the Middle East, today’s statement already looks a little out of date.
“Bond yields have risen sharply, expectations for rate cuts have been tapered from two this year to just closer to one, while gas prices have spiked significantly in the last 24 hours, providing fresh fears a looming burst of inflation is coming should the Middle East conflict become protracted. Fiscal headroom, as a result, may need recalculating in weeks to come. Rachel Reeves has historically spoken about shielding the UK economy from future shocks, so this will be a real test of that mantra.
“Looking at the specific forecasts, while the OBR has downgraded growth for this year, it has subsequently upgraded it for the next two years – although the net outcome remains the same. Rachel Reeves likes to say this Labour government is stimulating the economy, but the reality is the forecast and the actual results remain underwhelming at best. Reeves said she wouldn’t be satisfied with these forecasts being reality, and neither she should be, but whether she can in fact beat them is subject to events outside of her control.
“The problem she has is that the OBR admits the fiscal outlook remains challenging, before even getting into any geopolitical shocks. The tax burden remains high, demographic pressures are intensifying, and debt to GDP ratio could soar without a significant turnaround in fortunes. Global shocks to the economic system have had an outsized influence on the economy in the past, and with another looming, it is unclear where the growth will come from to help counteract those impacts. As a result, markets are likely to give little heed to today’s announcements, focussing instead on the new reality we find ourselves in.”
Chris Cummings, Chief Executive of The Investment Association, said:
“We welcome the commitment from government to both prioritise fiscal stability and deliver UK growth. Today’s statement focuses on the importance of supporting household finances, which is vital if we’re to build our nation’s financial resilience over the long-term. This goal sits at the heart of efforts to make investing more inclusive including through the retail investment campaign, which is due to launch at the end of April, and will help more people harness the benefits of investing.”
Dan Kemp, CEO of Portfolio Thinking, said:
“With the FTSE under severe pressure and Gilts vulnerable to stagflation fears this morning, the Spring Statement is largely political theatre. Investors shouldn’t mistake fiscal tinkering for a fundamental market shift; the OBR’s projections are point estimates for a complex adaptive system and should not be mistaken for certainties.”
“As bond markets wobble and equities slide, we must separate the architecture of compounding from the theatre of parliamentary politics. The fundamental case for UK equities remains anchored in their significant valuation discount to global peers, a margin of safety far more durable than Rachel Reeves’ fiscal headroom.”
“A great business purchased at a sensible price will navigate varying tax regimes and broad market sell-offs. A poor business priced for perfection will eventually punish the investor, regardless of what is announced at the despatch box today to try and soothe current equity weakness.”
Steve Owen, Head of Proposition (EMEA), Morningstar Wealth, said:
“Luckily, the Spring Statement sprung no new surprises as advisers are already working hard to plan for their clients after recent Budgets. Between IHT on pensions, changes to the Cash ISA allowance and cuts to CGT thresholds, financial planning has become much more difficult and tax-focused over the past 18 months. Today’s Spring Statement, which was essentially an economic update from the Chancellor, will be welcome respite for financial advisers as they help clients navigate an increasingly complex environment.
“The conflict in the Middle East has added uncertainty to not only the global economy but to client plans too. An ‘as you were’ Spring Statement is the little bit of reassurance clients need in these volatile times.”
Emma Wall, Chief Investment Strategist, Hargreaves Lansdown, said:
“The Chancellor was keen to stress the higher growth, lower inflation outlook for the UK in today’s Spring Statement. But markets are listening less to what is happening in the House of Commons and more on the war in the Middle East. Expectations that higher oil prices will flow through to re-inflation have sent yields higher, and cooled expectations for interest rate cuts. The market is now struggling to price in even a quarter point cut from the Bank of England’s Monetary Policy Committee. We think this is overly pessimistic but understand the caution. As we shared in yesterday’s market report, there are echoes of the 1979 Iranian revolution, which not only caused a significant shift in geopolitics and re-configuration of cross-globe allies and partnerships, but also resulted in an oil crisis which saw the price of crude double over the course of a year, higher global inflation and slower economic growth. It will be this stagflation risk that equity and bond markets are most sensitive to, but the dynamics of the oil market have evolved significantly over the past 45 years. Crucially, while oil prices may be higher now, consensus is that this disruption is transitory – and so too will the impact be on wider asset classes. In the event of an effective transition of power – and end to the fighting – oil prices are expected to return to $65 a barrel within weeks, and therefore the likelihood of a global growth shock is minimal.”
Susannah Streeter, Chief Investment Strategist, Wealth Club, said:
“The Chancellor was trying to project a ‘keep calm and carry on’ message, but market turmoil continued during her speech, with UK borrowing costs having shot up and London’s FTSE 100 deep in the red, staying around 2.6% lower. Although there was a nod to the current turbulence, the forecasts don’t take into account the rapidly developing situation in the Middle East. So even though Rachel Reeves championed forecasts of a further fall in inflation, there’s a clear and present danger of the price spiral taking off again due to escalating conflict with Iran.
“The Office for Budget Responsibility downgraded growth for this year to 1.1% but upgraded it slightly for the following years. This appeared to help sterling recover slightly against the dollar, but the moves were limited given that big risks have crept back into the outlook.
“The potential wiggle room identified in the OBR’s latest projections also risks being swallowed up by the economic repercussions of war in the Middle East. Hopes for an interest rate cut later this month are being dramatically scaled back due to the spike in energy prices. It means servicing the UK’s debt pile could prove more costly than current forecasts suggest. Already high energy costs have been blamed for holding back growth, and the big worry is that if planned support for industries is not brought forward, more firms could go to the wall, potentially pushing the UK’s fragile recovery back into reverse.”
Anna Macdonald, Investment Manager at Aubrey Capital Management, said:
“My view is that Reeves was hoping to deliver a ‘nothing to see here’ kind of statement, as she has promised to hold just one fiscal event per year now, which will be the budget.
“Strong tax revenues and sufficient headroom from the November budget, have meant that borrowing costs had been trending down recently, but given the escalation in the Middle East, yields are ticking up. Energy prices could impact inflation in the coming weeks and months which will limit the opportunities for further rate cuts, which would boost the UK economy.
“Unfortunately, we import a lot of gas, so this will weigh on the outlook. If only we had more production from North Sea fields which would at least be bringing in tax revenues!”
Matthew Amis, Investment Director at Aberdeen, said:
“Chancellor Reeves wanted a non-event and we got a non-event. Fiscal headroom slightly higher if you squint. Gilt issuance maybe a touch higher, long issuance maybe a touch higher but nothing in the detail that will be driving gilt yields. The geo-politics and the surge higher in energy prices are the only game in town and Chancellor Reeves’ Spring Statement will not be changing that.”
Laurence Booth, Global Head of Capital Markets at CMC Markets, said:
“Last November’s Budget was mired in controversy from start to finish. Not only did it attract endless speculation in the run-up to the event, but the OBR also accidentally published market-sensitive information on the day before the Chancellor of the Exchequer, Rachel Reeves, could address the House of Commons.
“In contrast and as many economists had predicted, the Spring Statement was a relatively low-key affair, with the Chancellor prioritising stability and consistency, rather than significant changes to fiscal policy. Buoyed by higher-than-expected tax receipts in January and steadily falling inflation, the Chancellor opted to stay the course and make the statement something of a non-event.
“The lack of radical changes to fiscal policy will be received positively by businesses and investors, who value stability and predictability, and will reduce the likelihood of trading volatility. Improved policy certainty may boost investor confidence and support capital flows into the UK. If sustained, this could strengthen the growth outlook and provide the Chancellor with a firmer backdrop heading into the Autumn Budget.
“With questions on the horizon about key funding pledges however, such as defence and education, there remains doubts about how the Treasury will raise these funds and where investment will come from. The statement did little to address these uncertainties and will result in caution from the markets as they wait to see what the Government announces in these areas.”
Chris Beauchamp, Chief Market Analyst at IG, said:
“You have to wonder whether the chancellor has checked a data terminal recently. Today’s note that inflation is falling faster than expected is, like all plans, unlikely to survive first contact with the enemy. UK gas prices are rising at their fastest pace in recent history, and much faster than in 2022. The government might be optimistic, but consumers are already beginning to fret.”
Grant Slade, Economist at Morningstar, said:
“As anticipated, the UK chancellor made no major changes to tax or spending policies in her spring statement. For the first time this March, the OBR has not published a formal assessment of the government’s adherence to its self-imposed fiscal rules. Still, the OBR forecasts that the UK government will achieve a budget surplus of 0.7% in fiscal year 2029-30, a 0.1% improvement versus its prior forecast in November last year.
“Moreover, fiscal headroom relative to the government’s balanced current budget rule by fiscal year 2029/30 increased by about GBP 2 billion to GBP 23.6 billion. This may provide the government with a little extra wiggle room on spending come the Autumn budget later this year, assuming the Middle East conflict turn out to be a benign shock to the UK economy.
“The OBR’s improved fiscal outlook comes in spite of a downgrade to its 2026 growth outlook, to 1.1% from a prior 1.4%. The downgrade to the near-term growth outlook is an unsurprising move, given the economy slowed in the fourth quarter of 2025 with the OBR’s 2026 growth outlook now aligning more closely with consensus growth expectations for the economy in 2026 of about 1%. Still, the OBR’s medium-term economic growth outlook is largely unchanged.
“The gilt market largely shrugged off the OBR’s improved fiscal outlook, with today’s spike gilt yields reflecting the surging energy prices amid the ongoing Middle East conflict.”
James Bentley, Director at Financial Markets Online, said:
“Rachel Reeves had promised a low-key Spring Statement. What we got was a Spring sideshow, with no policy announcements and a Chancellor relegated to the role of bystander by the market chaos. Her speech has been completely overtaken by events. A week ago the markets would have welcomed the news that government borrowing is coming down nicely, and the OBR’s forecast that unemployment will start to ease from its current five-year high.
“But with the UK stock markets a sea of red, encouraging economic forecasts and a Chancellor in self-congratulatory mood count for little. The Pound picked up against the Euro, but both the FTSE 100 and FTSE 250 barely moved following her speech. Two big questions remain – how far will equities fall, and will the surge in oil and gas prices nix any chance of interest rate cuts in the coming months?
“The good news is that the market impact of geopolitical shocks tends to be shorter-lived than that of economic downturns, and we are already seeing investors ‘buying the dip’. But the combination of missiles and rhetoric suggests there is no end in sight to the conflict, and further extreme volatility is likely.”
Guy Foster, Chief Strategist at RBC Brewin Dolphin said:
“The good news from the Spring Statement is that the public finances remain broadly consistent with the plans laid out at November’s Budget. Whether this government has restored economic stability is yet to be seen. Based upon the most recent forecasts, the Government will have more headroom but this week has highlighted how vulnerable states are global events.
“As a reminder, at the Budget, measures were announced which reduced public sector net borrowing. However, the cuts to borrowing will not take place until 2029 to 2031. Markets are already responding positively with yields on UK government debt falling. It’s clear this government is trying to double down on fiscal credibility.
“The OBR warned again that governments have tended to reverse plans to strengthen the public finances. The annual tradition of delaying the planned increase in fuel duty is an example of how political necessity outweighs fiscal prudence. The bigger reversals of fiscal plans have tended to be forced by economic shocks, such as the pandemic or the energy crisis. The difficulty of abiding by previous fiscal plans is what could limit the government’s ability to cope with any new economic shocks.
“The Chancellor stressed that energy bills would be coming down by £150 from next month. However, interruptions to the supply of gas with the current conflict in the Middle East has caused energy prices to increase sharply. A lot of Qatari gas, in particular, is typically exported to Europe and so interruptions to this supply have led to speculation of higher gas prices in the future. Were these prices to continue to rise and then be sustained, there would eventually be some impact on domestic utility bills. Under those circumstances, the government might come under pressure in the future to subsidise utility bills as they did during 2022 and 2024.
“Government bond yields have risen in anticipation of fewer interest rate cuts and increased borrowing caused by Middle Eastern energy market disruption. There are a great many parties with a vested interest in getting that energy flowing once more, however a protracted conflict could start to impact domestic energy prices and UK public finances.”
Isabel Albarran, Investment Officer at TrinityBridge, said:
“Today’s Spring Forecast does show some improvement in the UK’s fiscal position but, unfortunately, events in the Middle East will likely wipe that out. As expected, the Chancellor announced an increase in fiscal headroom of around ?2bn to ?23.6bn, helped by lower gilt yields since November, which more than offset a downgrade to the near-term GDP forecast from 1.4% to 1.1%. Unfortunately, this forecast doesn’t reflect the unfolding conflict in Iran or the disruption happening to energy supply, which has sent energy prices higher.
“As we have seen before, higher energy prices transmit quickly through to consumer price inflation, and the threat of higher inflation is likely to curb the Bank of England’s appetite to cut rates further this year. This could see bond yields higher for longer, increasing the interest burden on borrowing. At the same time, higher energy prices can act as a tax on economic activity and could constrain GDP growth. Taking these things into consideration, it seems unlikely that the Chancellor will still have additional wiggle room for further spending at the Autumn budget.”
David Williams, head of group risk at Everywhen, said:
“Today’s Spring Budget delivered no new announcements directly affecting employee benefits, a move that was widely expected and consistent with the government’s intention to avoid major policy changes in the Spring update. While we hoped for minor tweaks to help support employers and employees, the absence of change also brings a welcome period of stability for organisations who are still planning their benefits strategies around bigger changes announced over the last 18 months.
“Encouragingly, the broader economic backdrop continues to improve with lower inflation and interest rates. With this improved environment, many employers may feel better placed to invest in their people now or as part of future budgeting later this year – strengthening reward, wellbeing, and benefits packages. So, while no news is good news right now, it is important for the government to combine an improving outlook with momentum generated by activity such as the Keep Britain Working report and start to build future policy decisions around recommendations that can improve the productivity of the UK through healthy workforces.”
Bryn Jones, Head of Fixed Income at Rathbones, said:
“There was nothing major in the Statement, although it does provide marginally more headroom heading into the Autumn. That said, developments in the Middle East and their impact on inflation and rates may yet throw a small spanner in the works. Only time will tell.
One positive for the long end of the gilt market is the relatively low proportion of long-dated gilts in the remit – just 9.1% of issuance – which should support supply‑demand dynamics. However, for now this is being overshadowed by renewed oil price inflation concerns, pushing yields higher and prompting the market to scale back expectations for rate cuts.”
