Wed, 26 Mar 2025

Wed, 26 Mar 2025 Faisal Islam: Could surprise on growth save the day?

The UK's economic prospects are better than expected, but the forecasts are precarious and could easily be derailed.
Welfare cuts and reduced government department funding were key measures announced in Chancellor Rachel Reeves' Spring Statement, aimed at offsetting rising debt servicing costs. The statement did not include tax rises or changes to borrowing rules, but economists warn that the UK's economic outlook remains precarious. A 20% US tariff on the UK could lead to a downgrade in growth and erode the chancellor's £9.9bn headroom for borrowing, according to Office for Budget Responsibility (OBR) chairman Richard Hughes. Other risks include higher interest rates and lower UK productivity. Despite these uncertainties, the OBR forecasted that close to normal levels of growth will return in later years, with house building boosted by planning reforms that don't involve taxes or spending. Local authority housing targets and council land being freed up are expected to provide a significant boost to growth. The government's fiscal rules were maintained, but welfare cuts will lead to 250,000 more people living in poverty, according to estimates. The Impact Assessment suggests the policy aim is cost-saving rather than fundamental reform. The UK's economic situation remains fragile, with growth and interest rates posing ongoing risks. First Minister of Wales has requested a specific impact assessment on the Spring Statement's effects on Wales.
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