The Chancellor, Rt Hon Rachel Reeves MP, delivered the Spring Forecast on Tuesday 3 March, responding to the latest OBR economic and fiscal update. As expected, no tax and spend changes were announced, with the Chancellor positioned to deliver one fiscal event this year on the back of the decision to increase the fiscal headroom at last year’s Autumn Budget and relatively limited changes to the OBR’s economic and fiscal outlook.
Below, the CBI provides all the key details you need to know as attention turns to the Chancellor’s Mais lecture later in March where she will provide further detail on the government’s plans to boost growth.
The OBR’s economic and fiscal update
While pressures from uncertainty keep rising both domestically and internationally, the Chancellor received some good news from the OBR. The headroom for the primary fiscal rule (current budget to be in surplus by 2029/30) increased by £1.9 billion, from £21.7 billion to £23.6 billion. This is largely due to the revisions to the pre-measures receipts forecast, which reduce borrowing by £13 billion in 2030-31, benefiting from higher forecast equity prices driving higher revenues from capital taxes, corporation tax, and interest and dividend receipts.
However, short-term growth is not as optimistic as before, with the OBR decreasing its 2026 GDP growth forecast from 1.4% to 1.1%. This is the result of near-term cyclical weakness, with higher unemployment and lower inflation. After 2026, growth is broadly in line with the OBR’s November forecast as the cyclical recovery offsets the weaker growth in potential output.
The OBR projects that inflation will fall from 3.4% in 2025 to 2.3% in 2026, and 2.0% from 2027 onwards. The forecast for inflation in 2026 is 0.2 percentage points lower than in November, which is driven by greater slack in the economy, and lower food and energy prices. Market expectations for gas prices have fallen by 15% on average over the forecast since November.
On employment, the OBR expects the unemployment rate to peak at 5.3% in 2026, with labour market weakness appearing to still be driven primarily by entrants into the labour force struggling to find work amid subdued hiring demand. After peaking in 2026, unemployment is expected to fall to an estimated equilibrium rate of 4.1% by 2030.
The Chancellor’s response
With geopolitical uncertainty front of mind, the Chancellor was clear in articulating the importance of stability to delivering economic growth and pointed to three major areas that will be the focus of the government’s growth strategy – strengthening global relationships and breaking down trade barriers with key partners (including the EU), backing innovation and harnessing AI, and going further to transform the UK’s economic geography.
Efforts were also made to reiterate the support being made available to help households with the current cost of living pressures, including discounts on energy bills and a freeze in rail fares. The focus on addressing cost of living pressures was matched with a strong narrative around supporting growth in all parts of the country – with the Chancellor pointing to recent Green Book reforms that have the clear aim of unlocking infrastructure investment in areas outside London and the South East.
The narrative on unlocking growth in all parts of the country likely reflects the political battles ahead, with the local elections in May a key moment.
The CBI's next steps for our members
The Chancellor is expected to deliver further detail on the government’s approach to growth at a Mais lecture later in March, before attention turns to May’s local elections and then the Autumn Budget later in the year.
The CBI will continue to make the case that if the government wants to raise living standards and continue to address cost of living pressures, it must focus on addressing the costs of doing business. Firms of all sizes are continuing to struggle with punitive energy costs, pausing hiring decisions due to employer NICs and NLW increases, and tackling burdensome red tape.
Between now and the Autumn Budget, the CBI will be engaging closely with government to co-create solutions to these challenges – pointing out clearly what the government can do in the short term to support our members.
Get involved
CBI members benefit from opportunities to raise their business’ voice and shape CBI policy campaigns that deliver results:
- Re-watch our member webinar debrief on the Spring Forecast to understand the key announcements and what they may mean for your business.
Help us cocreate a modern industrial strategy that works across every UK region by signing up to attend one of our final Industrial Strategy Roadshow events.
Explore all the other ways to shape policy and raise your business’ voice – from the Employment Rights Bill to shaping the future of EU trade.
Plan your business response with exclusive CBI analysis
Members benefit from sharp, digestible insights from our team of leading Economists, who have once again been rated as one of the UK’s leading forecasters by the Sunday Times, alongside CBI policy experts. Explore key briefings to support your business response to the Spring statement and global events:
- Economic briefing on conflict in the Middle East: how escalating conflict will impact the UK economy – member exclusive
- Explore all CBI insights and analysis