FTI Consulting UK Public Affairs Snapshot: Spring Forecast 2026: Green shoots that may be uprooted

With Labour reeling from a by-election defeat in Gorton and Denton, the fall-out from the Peter Mandelson affair rumbling on, and the Prime Minister likely to face a further reckoning after May’s local elections, the Chancellor of the Exchequer, Rachel Reeves, was keen to ensure that today’s Spring Forecast did not become the cause of any fresh controversy for the government. Reeves kept a low profile in the run-up, as HM Treasury signalled to financial markets that it would be an uneventful update – a “forecast”, rather than a fiscal “statement” – with no last-minute policy surprises.  

That was ultimately the case. In a 20-minute speech, which re-used previous lines around rejecting “dogmas of the past” and “charting a course” through geopolitical turbulence, Reeves emphasised that inflation and borrowing were down and argued that living standards were improving because of decisions that her government had made. Reeves announced no new policies but confirmed that she would set out additional “growth” reforms in her Mais lecture in two weeks’ time. This is likely to feature a pivot back to “securonomics” and include more tangible policy commitments.  

But the OBR forecasts also reveal strong headwinds: falling migration, while likely to be trumpeted as a political win, will drive lower tax receipts, and the OBR data presents no evidence that the government’s policies have had any positive impact on unemployment, which is now set to peak at 5.3% this year, or the economic growth rate, which has been cut to 1.1% for this year. That latter figure has, however, been described as largely “cyclical” and will be offset by the expectation for higher-than-expected per capita GDP growth until 2030.  

The largest shadow, of course, is cast by the ongoing events in the Middle East, which eclipse any of the good news stories that the government had hoped to tell. The gaping caveat in the OBR’s forecast – that there are “a wide range of possible outcomes” – is an understated way to put it. Oil and gas prices are rapidly rising and, if sustained, the knock-on effects on inflation will be significant, rendering today’s forecasts obsolete almost immediately. Markets have already significantly scaled back their expectations for further interest rate cuts from the Bank of England, and stocks and bonds have continued to fall globally.  

Having hoped to instil some positivity and calm with a business-like address today, events outside the Chancellor’s control mean that the outlook is now full of uncertainty. Only three months have passed since the Autumn Budget, and it is therefore unsurprising that the fiscal picture has not shifted dramatically. But Reeves would doubtless have hoped that by flying under the radar in the build-up, she could generate some positive momentum from the despatch box this afternoon, signal that her long-term economic plan – of stability, investment, and reform – was paying dividends, and celebrate an improved fiscal headroom.  

This approach was overtaken by events. But paradoxically, instability overseas – however damaging to the economy – removes some of the pressure that Labour faces domestically. Noise from within the Labour Party will be less prominent in the news, and the arguments against any market-moving changes at the top of politics will only become stronger if the global economy is itself battling turbulence. The real issue will be whether the green shoots the Chancellor can point to today will be able to weather an international storm.