Rachel Reeves delivered a measured Spring Statement on 3 March 2026, revealing subtle shifts in the UK’s economic outlook without introducing major tax hikes or new spending initiatives.
Economic Forecasts: Growth Slows Amid Global Uncertainty
The Office for Budget Responsibility (OBR) has revised its growth projections, shaving down economic expansion for 2026 to 1.1%, a dip from the 1.4% forecasted last November. However, the outlook for 2027 and 2028 brightens slightly, with growth expected at 1.6% in both years—up from earlier estimates of 1.5%.
Unemployment is anticipated to rise to 5.3% this year before gradually declining to 4.1% by 2030. Inflation is forecast to ease to an average of 2.3% in 2026, aligning with the government’s 2% target by 2027.
Public Spending and Fiscal Discipline Strengthened
Following last year’s adjustments, the OBR will now await the next Budget to assess if Reeves remains on track to adhere to her tax and spending frameworks. Meanwhile, the government’s fiscal “headroom”—the margin for borrowing without breaking rules—has expanded from £21.7 billion to £23.6 billion for day-to-day spending.
Additionally, the margin against the target to reduce government debt as a proportion of national income has increased to £27.1 billion, signaling strengthened fiscal flexibility.
Housing Market and Interest Rate Projections
Mortgage interest rates on existing loans are forecasted to climb gradually from 4.1% in 2026 to 4.5% by 2030, a more optimistic outlook compared to previous estimates. Meanwhile, annual housebuilding is expected to dip from an early 2020s average of 260,000 to 220,000 in 2026/27, before rebounding sharply to 305,000 by 2030/31.
Immigration Trends: Net Migration Adjusted Downward
The OBR projects net migration to be 60,000 lower per year than the November forecast, largely due to an increase in British nationals leaving the UK. Overall, net migration is expected to oscillate between 200,000 and 300,000 annually through the decade’s end.
Notable Budget Revisions Impacting Revenue
Recent policy softening affects government revenue streams. The planned tax on inherited farmland, scaled back in December, will now generate £100 million less per year than initially projected. Similarly, the January decision to ease business rates for pubs and music venues in England will cost the Treasury an additional £100 million annually.
