3 March 2026: Spring Statement: What to expect for the UK economy

The UK’s economic debate is often dominated by the extremes: start-ups at one end and multinationals at the other. Both matter, but between them sits a powerhouse segment that quietly drives productivity, investment and employment across every region of the UK: the critical middle.

Mid-market companies matter everywhere. They are deeply rooted in their communities, with supply chains, talent, investment and social contributions anchored in the places they operate.

Often, they are the most productive and most export-ready firms in their region. Many are also family-owned and highly innovative, focused on adapting and reinventing themselves to create a sustainable business for the next generation.

These businesses act as both stabilisers and growth accelerators for local economies. They offer high-quality jobs, drive supplier ecosystems, stimulate local investment, and are frequently the businesses most likely to scale, spreading opportunity more evenly across the UK.

When a mid-sized engineering firm expands into export markets, or a food manufacturer invests in new technology, the benefits stay local, unlocking mid-market growth at scale. This means those benefits multiply across every region and nation.

The budget last Autumn was preceded by a lot of speculation, followed by large tax rises, but the Chancellor is hoping that her Spring statement will be more low-key.

Rachel Reeves has insisted her spring statement will be a quiet affair as she wants the Autumn budget to be the sole major fiscal event of the year.

The Chancellor's statement, rebranded from the "spring budget", will take place at an unconfirmed time this afternoon and is expected to last just 20 minutes.

It will be more of an update to the nation on how well (or otherwise) the measures she introduced in the Budget are doing.

Reeves will outline the latest economic forecasts from the Office for Budget Responsibility, which will then be published after the Chancellor has delivered her speech.

So, despite it being "low-key", it will still be a critical moment, as it will show the impact of the last budget and the government's policies.

The OBR produces two forecasts a year that indicate how the economy is expected to perform and whether the government is likely to meet the tax and spending rules it has set.

The Prime Minister has said that the UK will not join the US and Israeli offensive strikes on Iran, but will continue its “defensive actions” to protect British civilians and military personnel in the region.

Following the weekend, in which the US and Israel carried out military strikes deep inside Iran, killing Supreme Leader Ayatollah Ali Khamenei and other senior officials, several nations, including Australia and Canada, came out in support of the actions.

Iran has retaliated by firing missiles and drones across the Middle East, targeting Gulf states and U.S. military positions. The states targeted by Iran are UK allies, and where thousands of UK citizens are based.

British officials publicly stated the UK military did not participate in the US/Israeli strikes and did not endorse the offensive military actions.

However, on Sunday evening, Starmer announced that the UK had agreed to grant the US permission to use British military bases for "limited and specific" defensive strikes against Iranian missile sites and launchers.

Trump announced he was 'very disappointed' in Keir Starmer after the delay in the UK bases decision.

The financial markets were driven yesterday solely by reaction to the U.S. action in the Gulf. The price of oil and LPG spiked as Iran effectively closed the Straits of Hormuz, the main shipping route for the world's energy supply.

Sterling fell to a low of 1.3314 but soon recovered, closing at 1.3404, just ten points lower than its close on Friday.

Cynics are saying that it is not beyond the U.S. President to launch a major offensive in Iran to allow him time to cover up the mounting rumours of his involvement with convicted sex-trafficker Jeffrey Epstein.

While few serious commentators are giving much credence to this theory, Trump has been reticent to go into greater detail on what he has called the imminent and significant threat to the U.S.

He told reporters in a speech in the White House yesterday that the attack on Iran represented his country’s last and best chance to obliterate the sinister and evil regime governing Tehran.

Pete Hegseth, the Secretary of Defence, told reporters that he believes that the airstrikes will be over in four to five weeks, since the President is not interested in a “never-ending war”.

This entire campaign runs contrary to Trump’s election promise that he would put America first and not involve the country in overseas “adventures” that rarely have a good outcome and cost American lives.

So far, five American service personnel have lost their lives in this latest action.

Oil price spikes are the clearest and fastest way in which the U.S. economy will be affected by this action.

Strikes on Iran have already pushed crude prices sharply higher, with analysts warning of further increases if the Strait of Hormuz, through which roughly a fifth of global oil production flows, faces prolonged disruption.

Higher oil prices translate into more expensive gasoline, raising household costs and reducing discretionary spending. This is typically one of the most politically sensitive economic effects.

Economists note this is a supply-driven oil shock, which can feed into broader inflation if sustained. The Federal Reserve may not immediately change interest-rate plans, but persistent inflation in energy prices could complicate its path.

It seems that the more Trump berates the Fed for not cutting interest rates, the more he does to ensure they are economically unable to do so.

Global markets tend to shift into risk-off mode during major geopolitical shocks. Stocks often fall, while investors move into safer assets like the dollar and gold. This pattern has already appeared in early trading following the strikes.

The United States labour market is entering a pivotal cooling period, as the surprising resilience seen at the start of the year appears to be ebbing away,y leading to a significant slowdown. After an unexpected surge in January that saw the economy add 130,000 jobs, far outpacing initial projections, the outlook for February has shifted toward a starkly different reality.

Market analysts and high-frequency data indicators now estimate that only 65,000 jobs were added last month, marking a 50% drop in hiring momentum and signalling a potential cooling of the employment landscape.

Such an abrupt deceleration would come at a sensitive time for the Federal Reserve, which has been maintaining a delicate balance between controlling inflation and preventing a hard landing.

The contrast between January’s robust numbers and February’s tepid estimates highlights a "low-hire, low-fire" stagnation that has come to define the 2026 labour market so far.

For investors and workers alike, the drop to 65,000 suggests that the post-pandemic hiring era has officially concluded, replaced by a strategic, AI-driven caution that is beginning to reshape the corporate world.

The dollar index is ignoring the domestic economy as the events in Iran unfold rapidly. Yesterday, the Greenback rallied to a high of 98.75 and closed at 98.55. This was not the size of advance normally associated with a rush to a haven, and it reflects global concerns about Trump's motives for his actions.

European Central Bank Governing Council member Pierre Wunsch said he’s inclined for now to look past the jump in energy prices caused by the fighting in the Middle East.

Should policymakers face an “oil shock,” however, they’d have to assess the situation and decide what action to take, the Belgian Central Bank Governor told reporters yesterday in Brussels.

Despite the likelihood that higher oil prices would also weigh on the economy, such an outcome would certainly be inflationary, he said.

“We don’t know much, so I would certainly not rush to react to any movements in energy prices,” Wunsch said. “If it lasts longer, if the increase in energy prices is higher, then we will have to run our models and see what happens.”

The escalating war in the Middle East has led to a surge in oil prices and fanned inflation concerns. Traders yesterday pared bets on additional rate cuts this year.

While Central Banks tend to “look through” one-off effects, they are wary of risks to consumer expectations, particularly after the 2022 price shock proved more persistent than initially expected.

ECB President Christine Lagarde said last week that policymakers must keep an eye on still-elevated inflation perceptions.

German concerns will mostly be about any disruption to LPG supplies. The world's largest gas terminal, in Qatar, was closed for a period yesterday due to the threat of an Iranian drone and missile attack. However, only a sustained closure lasting weeks or months would cause genuine concerns throughout the EU.

The German industry association for the metals and electronics sector, Gesamtmetall, or the Federation of German Employers’ Associations in the Metal and Electrical Engineering Industries (M&E), sees bleak perspectives for the country’s economy.

In its latest economic report, published on February 27, the association warns that Germany may already be “permanently damaged” as a manufacturing location.

M&E economist Lars Kroemer told a press conference yesterday: “We see a significant divergence between German metals and electronics production and global industrial output.

“Private companies’ investments in property, plant and equipment had fallen significantly by the end of 2025,” he said.

“This is mainly due to the persistently poor assessment of the competitive conditions for German manufacturing companies, particularly in comparison with non-European locations; these have never been in negative territory for so long,” Kroemer concluded.

Germany’s economy is suffering from a continued competitiveness and investment crisis. As of January, M&E member companies have said that their industry’s competitive position relative to non-European Union competitors has worsened, and they are cutting back on their investments.

In official GDP statistics, though, the effect of the decaying industrial bases is at least partially compensated by ballooning state expenditure.

As a result, the manufacturing sector’s share of gross economic value added fell to a 35-year low of 19.4 percent in late 2025, according to the industry association’s statistics.

The Euro suffered at the hands of a stronger dollar yesterday. It fell to a low of 1.1671 and closed at 1.1690. As events unfold in the Middle East, there is likely to be a period of increased volatility in the foreign exchange and commodity markets.

Have a great day!