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Spring Statement reaction: The 'tragic' downgrade threatening Labour's growth mission
Mar 3, 2026
The UK economy is staring down a "tragic" downgrade as growth forecasts are slashed to a measly 1.1 per cent. Is the Labour government’s "defining mission" already hitting a wall?
In this emergency breakdown of the 2026 Spring Statement, Christian May, Simon Hunt and Maisie Grice unpick the brutal reality behind the headlines.
Discover why the Chancellor is desperately pivoting to "GDP per capita" to hide a stagnant economy and why global turmoil in Iran could make these already "anaemic" forecasts look optimistic.
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0:00
A confident Rachel Reeves has tried to
0:02
put a brave face on some pretty bleak
0:04
economic projections at today's spring
0:07
statement. It was something of a fiscal
0:09
update that the government has tried to
0:11
shape into a bit of a media non-event,
0:13
but it is revealing of the government's
0:16
economic strategy and the state of our
0:19
national economy. The chancellor's
0:20
central message was stability. She says
0:23
Britain needs to stay the course. Her
0:25
plan is working. We can't risk losing
0:28
economic momentum, especially with
0:30
volatile headwinds blowing in the Middle
0:32
East. But Reef's bullish tone can't mask
0:35
sluggish economic projections. The UK
0:38
economy is forecast to grow at a slower
0:40
pace than previously expected this year
0:42
with growth now forecast to come in at
0:44
an anemic 1.1% this year compared to the
0:47
OBR's previous forecast of 1.4%.
0:50
Now with me to break down the chances of
0:52
the speech, city editor Simon Hunt and
0:54
our investment reporter Meisy Grace.
0:56
Simon, let's talk about those ABR
0:58
forecast. It's a pretty chunky
1:00
downgrade. They had said that would grow
1:02
at 1.4% this year, I believe. Uh it's
1:05
now 1.1%.
1:07
Um we should unpick that. What lies
1:09
behind the downgrade? Uh given that it
1:11
would have come before the events of the
1:13
Middle East.
1:13
>> Yeah, as you say, that's a pretty
1:15
massive downgrade given that the last
1:17
forecast wasn't that long ago. that
1:18
seems to coincide with a a rise in their
1:21
unemployment projections far higher than
1:23
than than they were a few months ago as
1:25
well. So fewer people in the econom in
1:27
the economy means less economic activity
1:30
means a slowdown in growth and although
1:33
there are signs of a slight upgrade in
1:35
in growth in subsequent years. Uh growth
1:38
this year is looking to be pretty
1:39
anemic.
1:40
>> Let's look at those numbers again. 1.1%
1:42
this year is really tragic stuff. 18
1:46
months into a Labor government has said
1:47
growth was its defining mission. They
1:50
are upgrading by a very small amount to
1:54
forecast 1.6% growth 27 28 uh before it
1:58
comes back down again to 1.5%. If that
2:00
really is the trajectory of our overall
2:03
economic growth, our growth in output
2:05
over the course of a parliament, there's
2:06
really nothing to get excited about
2:08
here, is there?
2:09
>> No. No, there really isn't. Um but what
2:11
the government will probably try to
2:12
defend is the uh GDP per capita
2:16
forecast. Uh that's the um rise in
2:18
incomes for the average person which
2:21
they say will continue to rise over the
2:23
course of the parliament. They insist
2:25
that's the the metric that's most
2:27
important because it's the the pound
2:28
people feel in their pocket. And so
2:30
that's the the the figure they want
2:32
people to talk about because the
2:33
headline figure really isn't very
2:34
impressive at all. So the the pounds
2:36
that people feel in their pockets,
2:38
Maisy, the chancellor posed the question
2:40
that she feels will be asked or should
2:42
be asked ahead of the next election,
2:43
which is am I better off? Now on her
2:46
forecast, she says people will feel
2:47
better off upwards of a,000 pounds a
2:50
year um by the time of the next
2:52
election. But as things stand, it's a
2:55
bit of a tough cell, isn't it, to tell
2:57
people um almost contrary to their own
2:59
experiences that things are getting
3:01
better.
3:01
>> It really is. You know, within all that
3:03
today, it was a lot of noise and a lot
3:05
of promises, but there was nothing
3:06
concrete in how we're going to make this
3:07
happen. Of course, it's a spring
3:08
statement. It's not budget, so it's a
3:09
different ball game. But again, people
3:11
don't feel better off. She said it
3:13
herself, "Young people are suffering.
3:14
Unemployment is up. There's too many
3:16
young people out of employment.
3:18
Apprenticeship starts are down. There's
3:19
no way that people can get into jobs.
3:21
There's no way you can get on the
3:22
housing ladder. Student loans are still
3:24
a big thing right now." So, you know,
3:25
within all this conversation about how,
3:27
hey, we've frozen prescriptions, the
3:28
rail fares are freezing, people are
3:30
still not seeing substantial changes to
3:32
make them feel better off in time for
3:34
the next election.
3:35
>> And most of the changes that the
3:37
chancellor trumpeted today, and this
3:38
really was a speech in which she
3:40
effectively tried to vindicate her
3:42
previous budgets and say, look, all the
3:43
decisions I've made mean that things are
3:45
now working. She talked about freezing
3:47
railfares, freezing prescription
3:48
charges, reintroduction of um breakfast
3:51
clubs and childare. Um and we know that
3:54
welfare expenditure overall is going to
3:56
go up and up and up. So it seems to me
3:58
that this is a case of the government
4:00
saying how can we make life easier for
4:01
people? Well, we can subsidize and we
4:03
can redistribute and we can increase
4:04
welfare. Is that a meaningful substitute
4:08
for an economy which is growing properly
4:10
or indeed looking at ways to reduce the
4:12
overall tax burden which is forecast to
4:15
hit fresh highs certainly by the end of
4:17
this parliament. It's about taxes. Talk
4:18
about the pound people feel in their
4:20
pockets. They feel them being taken out
4:21
of their pockets. It's a tough one
4:22
because you know again these initiatives
4:24
are going to help people at the lower
4:25
end of society but at the same time
4:28
there are people who are at the higher
4:29
end especially the squeeze middle income
4:31
earners these Henry's that we know
4:32
London are flooded with that are
4:34
struggling to make ends meet.
4:35
>> You talk about Henry's that's high
4:37
earners not rich yet.
4:38
>> Yep. Those are the ones. Yep. Uh those
4:40
are the ones who are very much in London
4:41
and who are very much in essence really
4:42
feeling the squeeze. Middle earners
4:44
really felt the budget squeeze. They got
4:45
to continue feeling it. So you know
4:47
again it's it's you know helping people
4:49
at low society is very much needed. But
4:50
if you're not in turn helping out the
4:52
ones who are in fact helping those out,
4:55
you're getting a really bad cycle here.
4:57
And I guess once again to try and from a
4:59
perspective, how can we how can we fix
5:01
how can we sort this? It comes back to
5:02
let's foster an investment culture.
5:04
Let's grow the economy in that way.
5:05
That's how we as people who are paying
5:06
our taxes can go forward and sort of
5:08
make these changes to make it better.
5:10
>> So the chancellor insists that she will
5:12
beat these forecasts. You might say it's
5:13
a pretty low bar, but has that challenge
5:16
that she set herself just got harder
5:17
given what's unfolding as we sit here as
5:20
we speak in Iran and in the region of
5:22
the Middle East? Well, indeed, and there
5:24
were lots of forecasts that she was
5:26
quite keen to to champion uh to trump it
5:29
um this afternoon by the OBR, things
5:32
like inflation uh set to fall, uh her
5:36
fiscal headroom set to go up. But all of
5:38
these forecasts seem pretty meaningless
5:40
given that they were all made before the
5:43
the huge market disruption that we've
5:45
seen over the past couple of days uh
5:47
since the the war in Iran. Um in
5:50
particular things like uh energy prices
5:52
going up massively. Um that's going to
5:55
mean uh inflation isn't going to come
5:57
down at the rate that the OBR had
5:59
previously thought. Um other things like
6:02
um the OBR said that government receipts
6:04
will will rise by about half a billion a
6:06
year because of rising equity prices and
6:08
the stamp duty the government will
6:10
collect. Well, the Footsie is down by
6:12
about 5% over the past couple of days.
6:13
So those forecasts feel pretty
6:15
optimistic as well. Um so those
6:17
statistics that the government was most
6:19
keen to talk about today are probably
6:21
the ones least likely to actually bear
6:23
out um in the next few months. our
6:25
polling that we do of the great British
6:26
public once a month um with Freshwater
6:29
Strategy just got the latest data set in
6:31
yesterday.
6:32
>> We have a tracking poll where we ask
6:34
people about their personal finances,
6:36
about confidence in their personal
6:37
finances. Um one in five members of the
6:40
British public say they would not be
6:42
able to meet an unexpected £500 bill. Um
6:46
and as you talk about, you know, those
6:49
very often refer to people who who are
6:51
struggling and who at the very lowest
6:52
end of the income scale. But up that
6:54
scale, there are also people who feel
6:55
like the contract is broken, that their
6:57
earnings don't stretch far enough that
6:58
they're not able to obtain and achieve
7:00
what they thought they would have done
7:01
by this stage or age in life. What's
7:04
your sense of the general direction of
7:07
confidence and sentiment among those who
7:09
who can invest? The government wants to
7:10
make a big push on retail investment.
7:12
and they want people to take control of
7:13
their own finances. Do we have any sense
7:16
yet that people are beginning to feel a
7:18
bit of a spring in their step?
7:19
>> It's it's it's an interesting question.
7:21
You know, I look at the polling myself
7:22
also from when I cover it and you know,
7:24
people are increasingly each month
7:26
feeling less confident and that's a real
7:28
juosition to seeing a lot more noise
7:30
around investment. As you say, if you go
7:32
on any tube on, you know, any train,
7:34
you're going to see about five different
7:36
platforms advising you in about next
7:37
five minutes. So again, I guess it comes
7:40
down to how much can they put into their
7:42
investments, how much cash they willing
7:43
to separate from. As we know, this whole
7:45
idea that cash is king is still a very
7:47
lingering for this many people. So it
7:50
really does depend on how much they are
7:51
willing to put away and also where they
7:52
place it. It depends on how you invest.
7:55
You know, there's a lot some assets are
7:56
a lot more volatile, a lot more riskier,
7:58
or you may want to go longterm and play
7:59
the long game. But I guess it comes down
8:01
to how much risk you're willing to play,
8:02
how much you're willing to invest and
8:04
part with, and also how much confidence
8:05
the government are fostering into people
8:07
to put money into the stock market and
8:09
trust that they're going to see returns
8:10
soon, then it is worthwhile.
8:12
>> Simon, there she is. Um, she got a
8:14
spring in her step. Um, a lot of people
8:15
saying it was a very confident
8:16
performance from the chancellor, the one
8:18
of her better performances in the
8:20
Commons. I suppose the low bar would be
8:21
when she was crying. Uh, but today she
8:24
gave a pretty bullish speech. In fact,
8:26
it was so bullish that the shadow
8:27
chancellor Mel Stride in his response
8:29
asked what planet does she think she's
8:31
on accused her of utter complacency and
8:33
of being in denial. But what else could
8:35
she do?
8:36
>> Well, indeed, and I think that she's
8:38
probably most relieved by an upgrade to
8:40
her fiscal headroom because that was
8:42
something that was really concerning
8:44
businesses and economists over the past
8:46
year. So, any upgrade to that is is a
8:49
relief as far as she's concerned. Um, I
8:52
think as far as businesses are
8:53
concerned, perhaps the the one good
8:56
piece of news they can take away from
8:57
this is that the chancellor didn't say
8:59
very much. Normally when the the
9:00
chancellor stands up at the dispatch box
9:02
to give a speech about the economy, they
9:04
all go back and check their spreadsheets
9:06
and realize that their costs are going
9:07
to go up by several million pounds. At
9:09
least they don't have that today. And
9:11
and the upgrade to the headroom likely,
9:13
hopefully, fingers crossed, means that
9:15
come the next budget, we won't see
9:16
another bruising round of tax rises.
9:18
Well, the headline has to be 1.1%
9:22
GDP growth forecast for this year. Um, a
9:25
lot of people saying that is simply not
9:27
good enough that we must be able to do
9:29
better. Um, other analysts I've seen
9:31
today in the city saying given what is
9:33
going on in the Middle East, the spring
9:35
statement today was an act of utter
9:36
irrelevance. Well, be that as it may, we
9:39
will continue to try to make sense of it
9:40
here at city. So, Maisy Rice, Simon Han,
9:43
thank you very much for joining us. You
9:44
can stay up to date on all the spring
9:46
statement developments and fallout at
9:47
cityam.com and on the city app.
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