Rachel Reeves will not use her spring statement to announce big policy changes
Chancellor Rachel Reeves may be forced to add a cautionary note to her Spring Statement on Tuesday as forecasts for the economy could be knocked off-course by the attacks in the Middle East.
Despite having a healthy surplus to play with, as a result of higher tax receipts, Ms Reeves has told the markets to expect a “boring statement” with no policy changes expected.
The Chancellor will want to see past the immediate effects of the missile strikes and internal turmoil within the Labour government. Interest rates and inflation are falling, as are energy prices, enabling her to project an air of calm and seek to reassure the markets that her plan is working.
Her team has insisted that Tuesday’s statement will be a “non-event”. There is no expectation of tax and spend changes beyond a possible easing in the energy profits levy, or windfall tax, on oil and gas firms which could offer some support to beleaguered Scottish Labour leader Anas Sarwar.
The Office for Budget Responsibility will publish its latest outlook for the economy and public finances, but analysts are warning that the conflict between the US, Israel and Iran could push oil prices higher, feed into inflation and delay interest rate cuts.
There are other issues of growing concern, not least the sluggish growth rate and rising unemployment.
Kathleen Brooks, research director at XTB, said: “The unemployment rate is expected to be revised higher. In its previous forecast, the OBR expected the unemployment rate to hover around 5% through to 2027.
“However, the unemployment rate rose to 5.2% in the final quarter of last year, and the UK’s youth unemployment rate surged above the EU’s level for the first time, it now stands at 15.3%,” she said.
Brooks also said that expectations are growing that the OBR will downgrade last year’s growth forecast to 1.1% from 1.3%, after a sluggish second half of the year.
Busy corporate week
The FTSE 100 continues to hit new records, closing just short of the 11,000 level on Friday at 10,910.55, having hit 10,000 only two months ago.
Middle East tensions mean it is expected to open lower on Monday and it will rely on some strong figures from a busy week of announcements to resume any upward movement.
Aberdeen Group, Aviva, Craneware, Greggs, ITV, Reach, Taylor Wimpey and Weir, are among those reporting.
In a January update, Aberdeen Group said it had seen a 9% year on year growth in assets under management and administration to £556 billion (31 December 2024: £511.4bn), as it benefited from positive markets. The interactive investor platform was particular strong with a 14% rise, and Q4 net flows of £1.4bn.
Investors will be keen to see if the strong surge in the FTSE 100 since then has enabled chief executive Jason Windsor to build on progress in all three business segments.
Shares in Aviva stand near their highest mark since 2008, after a series of disposals to slim down the business, strong earnings, consistent dividend growth and the well-received acquisition of Direct Line.
Chief executive Amanda Blanc even felt confident enough to lay down new three-year goals alongside November’s third-quarter results including the return of £7bn in cash to shareholders, a sum equivalent to more than one-third of the company’s stock market value.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said that Greggs had a strong finish to 2025, with sales growth accelerating in the final quarter to 2.9% and 121 net new shop openings over the year.
However, full-year pre-tax profit guidance is expected to come in at £173m, down 9% on the prior year.
DIARY
Monday 2 March
- Full-year results from Smith & Nephew, Bunzl
- First-half results from Craneware
Tuesday 3 March
- Full-year results from Aberdeen Group, Greggs, Inchcape, Man Group, Travis Perkins, and Reach
- First-half results from Kier
- UK Spring Statement from Chancellor of the Exchequer Rachel Reeves
- BRC UK retail sales
Wednesday 4 March
- Full-year results from Metro Bank and Weir
- First-half results from Galliford Try
Thursday 5 March
- Full-year results from Aviva, Entain, Harbour Energy, ITV, Reckitt Benckiser, Rentokil Initial, Serco, Taylor Wimpey
- Purchasing managers’ index (PMI) for the UK construction index
Friday 6 March
- Full-year results from IMI
- Halifax UK house price index
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