Today’s spring statement was never going to be a game-changer. But after Rachel Reeves landed a multibillion-pound body blow to businesses back in October, certain optimists were still crossing their fingers that a few crumbs of comfort would emerge to help ease the pain ahead.
True to her word, however, Reeves delivered more of an economic update than any major policy shifts, meaning hopes of relief on National insurance hikes or reforming business rates must wait for another day.
Perhaps the biggest question that’s hung over Reeves since the last budget is how those whopping tax hikes on businesses are to be aligned with the government’s chief mission of supercharging growth.
Today offered little clarity. The Office for Budget Responsibility (OBR) halved the UK’s growth prospects for 2025 to 1%, while warning that Britain’s economic outlook is “more challenging since the autumn budget”.
Reeves will argue that growth in the coming years is now expected to be faster than the OBR predicted last autumn – but with a peak of 1.9% in 2026, she’s hardly lit an economic firelighter. Even the Chancellor conceded she’s “not satisfied with these numbers”.
The food industry could really do with a pick-me up. Confidence is at a two-year low, with Tesco, Sainsbury’s and Morrisons all announcing major job losses since the autumn budget.
At the start of the year, Morrisons went so far as to blame its swingeing cuts directly on the government’s “avalanche of costs”, while the more diplomatic Sainsbury’s spoke of having to make “difficult decisions” in advance of the £140m in extra costs it will have to find from next month.
Cuts, taxes and silver linings
Brits know the difficulties the country is in all too well, with growing numbers of people cutting back on spending due to their perception of a deteriorating economy, KPMG research showed this week.
A quick turnaround seems less and less likely, with the OBR today forecasting a gradual slowdown of living standards growth over the next few years.
It’s an unfortunate irony given the government opted to impose tax rises on businesses rather than individuals in order to help consumers retain more of their purchasing power.
The next nine months are set to prove particularly painful as rising energy bills combine with extra business expenses to boost inflation to 3.2%, according to the OBR.
But after that, there are – to an optimist’s eye at least – signs of hope. Inflation is predicted to begin “falling rapidly” to 2.1% in 2026 “as energy prices drop, food price inflation falls, and wage growth eases back”, the OBR says.
In the grand scheme of things, this is a very small crumb of comfort. Things are about to get tougher for businesses, the public, and Rachel Reeves herself.
But as any good optimist will tell you, it can sometimes be best to take any silver lining you can get. Even when it’s very hard to find.
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