Spring Statement 2026 – A Financial Forecast and Budget Update

What is the Spring Statement?The Spring Statement was established to provide an interim update on the public finances and the UK economy’s performance. Unlike the Autumn Budget, it has historically been a smaller event, often focusing on the OBR’s revised growth and inflation forecasts rather than major new tax or spending changes. For 2026, the Chancellor leaned into this quieter format to signal a departure from the fiscal events of the past that were often used for short-term political gains.

Why the Format Has Changed This YearThis year’s statement marks a significant shift in how the government handles fiscal events. The Chancellor has moved toward a “one major fiscal event per year” model, with the primary Budget held in the autumn.

The 2026 Spring Statement is being treated as a “Spring Forecast” rather than a full fiscal event for several reasons:

Stability and Certainty: By restricting major policy shifts to once a year, the government aims to provide families and businesses with a more predictable economic environment.

No Formal Rule Assessment: For the first time in its 16-year history, the OBR will not publish a formal assessment of whether the government is meeting its fiscal rules during the spring update. This assessment will now take place only once a year alongside the Autumn Budget.

Reduced “Tinkering”: Moving away from biannual policy changes reduces the pressure on the Treasury to announce “rabbit out of the hat” measures for the sake of a headline.

“The Right Economy Plan for our Country”Rachel Reeves started her presentation by acknowledging the situation in the Middle East and stated that we have the “right economic plan” in place and are beating the forecast.

Her presentation concentrated on:

  Building growth

  Supporting Families

  Strengthening trading relations

  Economy Security

She repeated the intention to have one fiscal announcement a year – the November statement.

Key Headlines and Economic PerformanceThe Chancellor used the statement to highlight that the UK economy is moving in the right direction. However, she acknowledged that the global landscape has become “yet more uncertain” due to ongoing conflict and energy price spikes. Despite these headwinds, the government pointed to significant improvements in borrowing, which have been reduced by £18 million and remain below the G7 average. Borrowing is forecast to drop from 4.3% to 1.8% by 2029/30.

Growth and InflationThe Office for Budget Responsibility (OBR) has provided updated growth forecasts, factoring in lower net migration and an adjusted profile of Gross Domestic Product (GDP). GDP measures all economic activity within the country; when it falls, the economy is shrinking.

• GDP Projections: Growth is predicted at 1.1% for 2026, 1.6% for 2027 and 2028, and 1.5% for 2029 and 2030.
• Historical Performance: The economy grew by 0.1% in the final quarter of 2025, a slightly slower rate than economists had expected.
• Inflation Status: Inflation (the sustained increase in the price of goods) cooled to 3% in the year to January, down from 3.4% in December. While reducing faster than expected, it remains above the Bank of England’s 2% target.

Fiscal Headroom and Public Sector PressuresAnalysts noted a slight increase in “fiscal headroom”—the buffer the Chancellor uses to spend or borrow while meeting fiscal targets—from roughly £21.7 billion to £24 billion. However, this gain is tempered by:

• Local Government: An ongoing funding black hole.
• Public Services: Rising costs in welfare and special educational needs.

Energy and Cost of LivingA major theme was the surge in global energy prices. With household bills potentially hitting £2,500 due to Middle East tensions, the Chancellor faced calls for emergency protections. To mitigate this, a £150 discount on energy bills will be implemented from next month.

The government maintains that keeping inflation low and stable is the best way to support families. Real wages have increased, and average disposable income suggests people are expected to be £1,000 better off per year.

Housing and EmploymentThe OBR noted that house prices remain a key indicator of household spending power. Additionally:

• Mortgages: There have been six interest rate cuts since the General Election, leading to typical savings of £1,300 on new fixed-rate mortgages.
• Unemployment: The rate rose to 5.2% at the end of 2025. To meet the definition of unemployed, an individual must be without work, available for work, and actively seeking it.
• Outlook: Unemployment is expected to peak this year and then drop. For young people, the government is increasing apprenticeships and offering an employment guarantee.

Next Steps

If you would like to know how the latest economic forecasts might impact your personal or business tax planning for the 2026/27 financial year, please give us a shout.

Contact the team at Hedges Quinn today to discuss your financial strategy and ensure you are best positioned for the year ahead.