Slowing growth as business leaders seek urgent action

Chancellor Rachel Reeves delivered her Spring Statement to the House of Commons under the shadow of rising tensions in the Middle East and growing fears of an inflation shock caused by rising energy prices.

In a speech that lasted just over 20 minutes, Reeves stressed the importance of “stability in an increasingly uncertain world”, pointing to lower inflation and previous interest rate cuts as evidence that the cost-of-living squeeze on households is easing. However, apart from presenting updated forecasts from the Office for Budget Responsibility (OBR) and criticizing the opposition, he did not reveal any new tax or spending measures.

The Chancellor has committed to just one financial event each year, the Autumn Budget, meaning the Spring Statement is positioned as a forecast update rather than a policy forum.

Growth slowed in 2026

The OBR has revised its forecast for UK economic growth in 2026 to 1.1 per cent, weaker than the 1.4 per cent forecast in November. Reeves stressed that the long-term outlook remains strong, forecasting growth to reach 1.6 percent in both 2027 and 2028, slightly stronger than previously thought, before settling at 1.5 percent in 2029 and 2030.

The downgrade comes amid soft domestic demand, regional instability and renewed energy market volatility following military escalation in the Gulf region. Rising oil and gas prices threaten to complicate the path to inflation, especially if disruptions to global supply chains continue.

Unemployment will rise before falling

Unemployment is expected to rise to 5.3 percent later this year as the shrinking demand for workers eats into the economy. The rate is expected to decrease gradually, ending the parliamentary term at 4.1 percent, lower than at the beginning.

The Chancellor put this as evidence that the labor market remains strong despite temporary conditions. However, youth unemployment and the monitoring of business employment remain significant problems in many sectors.

Collapse of borrowing and headroom is improving

The OBR forecasts that borrowing will be £18 billion lower than expected in the autumn. Total public sector borrowing is expected to decline from 4.3 percent of GDP this year to 1.8 percent in 2030.

Reeves stressed that the financial “headroom” against self-imposed regulations had increased from £21.7 billion in November to £23.6 billion. The buffer is designed to stabilize financial markets and protect against unexpected shocks.

He also confirmed plans to meet with North Sea energy industry leaders to discuss the impact of Middle East tensions on domestic production and energy security.

Night economy: “The talk of stability will not save us”

Despite the Chancellor’s insistence on stability, business leaders were quick to challenge what they described as a disconnect between Westminster’s messaging and mainstream reality.

Michael Kill, chief executive of the Night Time Industries Association (NTIA), said the statement failed to recognize the pressure facing tourism and leisure businesses.

“Across the UK, big companies and companies are collapsing at a rapid pace. Confidence is fragile. Margins are gone,” he said.

Kill warned that rising energy costs, higher National Insurance contributions and continuing business rate burdens were putting “significant pressure” on the sector. He called for a reduction in VAT so that people can welcome tourists, saying targeted interventions will stimulate demand, protect jobs and restore confidence.

As youth unemployment rises, the NTIA stressed that the night-time economy has traditionally provided young people with work opportunities, and warned that higher employment costs make it harder to sustain those roles.

Business confidence remains fragile

Separate research from the Zoho Digital Health Study 2026 underscores the state of vigilance across UK businesses. 21 percent of business leaders cited high inflation, the risk of recession and rising interest rates as their biggest external challenge.

Half of firms reported a rise in costs per employee over the past year, ahead of a further 4.1 per cent rise in the National Living Wage due in April 2026.

Sachin Agrawal, managing director at Zoho UK, said leaders are prioritizing productivity and automation over expansion.

“Businesses want to grow, but they do it very selectively by investing in technologies that deliver clear benefits,” he said.

The AI ​​platform Photoroom has also urged the government to align its pro-entrepreneurial rhetoric with virtual digital support for SMEs, arguing that access to AI tools can significantly reduce overheads and increase productivity.

Thames transport: a missed green opportunity

Uber Boat’s Thames Clippers said in the Spring Statement that we missed an opportunity to accelerate London’s green river transport revolution.

Geoff Symonds, chief executive of Uber Boat by Thames Clippers, said regulatory changes and green fuel subsidies could be implemented at lower costs.

“Low-level budgets should not mean low ambitions for the environment,” he said, calling for balance in social networks between river transport and land-based networks.

A tone of caution in uncertain times

The Spring Statement was intentionally blocked. Reeves’ strategy is to project fiscal discipline and market stability while retaining room for maneuver ahead of the Autumn Budget.

However, with energy prices rising, national tensions rising and consumer confidence faltering, the path ahead is far from stable. The coming months will test whether stability alone is enough, or whether targeted intervention is inevitable.

For now, the Chancellor’s message is clear: hold the line, protect financial integrity and hope inflation continues to fall despite global turmoil. Whether businesses and households feel that stability in practice is still an open question.