Posted on: 26th March 2025 in Finance
All eyes were on Chancellor Rachel Reeves today as she gave an update on the health of the UK economy.
While the spring statement is not a formal budget, it is one of the two major financial statements. Instead, the spring statement gives an update on the current economic outlook and progress made since the budget.
The autumn budget only took place five months ago. However, a lot has changed in a short space of time.
In her own words, Reeves kicked off the spring statement by saying, ‘The world is changing’, a sentiment she echoed in his closing remarks.
The question is, what has changed, and how is the economy looking as we approach the end of the financial year? Below, we recap the key points from today’s spring statement.
The chancellor did not announce any further tax increases. Instead, the focus was on tackling tax evasion. Plans are in place to “increase the number of tax fraudsters charged each year by 20%”.
Reeves said the move would raise a further £1bn for the UK economy. This brings the total revenue raised from reducing tax evasion to £7.5bn.
Inflation soared to 11% under the Tories but has gradually been falling. The latest data, released on the morning of the spring statement, revealed that inflation fell to 2.8%.
However, the Office for Budget Responsibility (OBR) forecasts inflation to be 3.2% on average this year before falling to 2.1% in 2026. By 2027, inflation is expected to settle at 2% — the target set by the Bank of England.
The economic outlook for 2025 read a bit like a UK weather forecast — gloomy but with rays of sunshine trying to pierce through the cloudy sky.
The OBR has cut its growth forecasts for the rest of 2025 from 2% to 1%. In contrast, the Bank of England estimates the UK economy will grow by 0.7% in 2025.
However, it would appear that brighter days are to come. The OBR forecasts that GDP will increase by:
Building more homes was a key part of the Labour manifesto. Today, Reeves said that under the party’s planning reforms, house building will hit a 40-year-high.
The OBR forecasts 1.3m new homes over the next five years, just shy of the party’s manifesto promise of 1.5m. The chancellor said that housing reforms would result in a 0.2% boost to GDP (£6.8bn).
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