Expert comment: Spring Forecast

"As tensions escalate in the Middle East and oil prices rise, Rachel Reeves told Parliament that Labour’s economic strategy remains the right course for the country. She argued that households are expected to be around £1,000 better off per year under the government’s plans, stating: “This Government has the right economic plan for our country, a plan that is even more important in a world that in the last few days has become yet more uncertain.”

The Office for Budget Responsibility (OBR) forecasts that economic growth will reach 1.1% in 2026, down slightly from the 1.4% projected in November. However, the medium-term outlook has improved modestly, with growth in 2027 and 2028 revised up from 1.5% to 1.6%. Unemployment is expected to peak at 5.3% this year before gradually falling to 4.1% by 2030. Inflation is projected to return to the 2% target this year, potentially paving the way for further reductions in interest rates.

However, these forecasts do not account for the potential impact of higher energy prices driven by the conflict in the Middle East. If pressures continue to intensify, the outlook could quickly deteriorate, affecting not only the UK but the global economy.

At the same time, the UK continues to face heightened scrutiny in the post-Brexit landscape, with several structural challenges still unresolved. It is similar to attempting to complete a puzzle with a crucial piece missing at its centre: however carefully the remaining pieces are arranged, the overall picture cannot fully come together.

Overall, the tone is cautiously optimistic, but fragile in the face of geopolitical risks and persistent structural issues."