What to expect from the UK Spring Statement on 26 March 2025

As the UK gears up for the Spring Statement on 26 March, all eyes are on Chancellor Rachel Reeves as she navigates a challenging economic landscape. This fiscal update, often referred to as the Spring Forecast, is expected to provide insights into the state of the UK’s finances and outline the government’s plans for addressing pressing economic issues.

What is the Spring Statement?

The Spring Statement is Chancellor Rachel Reeves’ update on the state of the nation’s finances. It will take place on the same day as the Office of Budget Responsibility’s (OBR) latest economic and fiscal outlook is published.

How will it differ from a Budget?

Technically, the Spring Statement is not designed to act as another Budget and is not expected to introduce significant economic changes. According to the Treasury, the UK plans to limit itself to one major fiscal event annually – the Autumn Budget.

However, there is speculation that Chancellor Reeves might leverage this occasion to unveil new measures aimed at balancing public finances and reinvigorating the economy.

Economic context and challenges

Recent data from the Office for National Statistics reveals that the UK economy experienced minimal growth of just 0.1% in the final quarter of 2024, following stagnation in the previous quarter. Additionally, the Bank of England has revised its growth forecast for 2025, lowering expectations from 1.5% to 0.75%, signalling a slowdown in economic momentum.

These headwinds are likely to shape the tone and content of the Spring Statement.

Potential announcements

1. Spending cuts over tax rises: Reports suggest that the government may lean towards spending cuts rather than introducing new tax hikes. Welfare cuts, Whitehall efficiency measures, and planning reforms are among the areas being considered.
   
   The Spring Statement may include extensions to the freeze on income tax and National Insurance thresholds, potentially lasting beyond 2028-29, to raise additional revenue. Speculation also surrounds possible changes to inheritance tax thresholds and ISA contribution limits to address fiscal challenges and encourage savings. These measures aim to balance economic stability with long-term fiscal discipline.
    
2. Support for businesses: While businesses have faced challenges such as increased National Insurance contributions, there is speculation about potential relief measures. These could include adjustments to the Employment Allowance or targeted support for sectors like agriculture and charities.
    
3. Infrastructure and growth initiatives: The government’s ambition to create ‘Europe’s Silicon Valley’ between Oxford and Cambridge may feature prominently. This initiative aims to boost the economy through infrastructure improvements and streamlined planning regulations.
    
4. Fiscal discipline and long-term planning: The Chancellor is expected to emphasise fiscal discipline, balancing short-term borrowing needs with long-term economic stability. This may involve revisiting controversial tax policies introduced in the Autumn Budget, such as inheritance tax reforms.

Balancing act: Anticipating changes and challenges in the upcoming Spring Statement

Many of Rachel Reeves' policies announced in the October budget have faced significant backlash. While there is pressure on her to reconsider certain measures, such as the inheritance tax on business assets and changes to National Insurance contributions, the overall sentiment leans towards scepticism about any major reversals. Financial analysts and investors express cautious optimism, acknowledging the delicate balance the government must maintain to foster investor confidence. 

Any changes to tax policies, such as inheritance tax or capital gains tax, may impact high-net-worth individuals and their financial planning strategies. Additionally, any measures aimed at stimulating economic growth could influence investment opportunities and market dynamics.

As we await the Chancellor’s announcements, staying informed and proactive will be key for navigating the evolving economic landscape. The Spring Statement promises to be a pivotal moment, offering insights into the government’s priorities and the direction of the UK economy in the months ahead.

Next steps

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