UK: Fiscal update supports modest growth – TD Securities

TD Securities’ Global Strategy Team notes that UK Chancellor Reeves delivered a cautious Spring Statement with no major new policies. Updated OBR projections show slightly slower UK growth in 2026 but stronger growth thereafter, alongside lower inflation forecasts. The team highlights that reduced financing needs and remaining fiscal space could be used if geopolitical risks intensify or policy is loosened later.

Spring Statement and OBR projections

"As largely expected, Chancellor Reeves played it safe in her fiscal forecast update, with no material new policies announced. The OBR projections showed more headroom by 2029-30, at £23.6bn (vs £21.7bn prior)."

"Macro projections were updated as well, showing slightly slower growth in 2026, but stronger growth thereafter (and alongside a downward revision to population estimates, means stronger per capita GDP growth as well)."

"The OBR's inflation forecast was lowered for 2026 to 2.3%, and remains unchanged at 2.0% in 2027. These numbers suggest that there is still fiscal space available should current geopolitical developments require it or should the government decide to slightly loosen policy in its Autumn budget. "

"The UK DMO’s Net Financing Requirement for FY26/27 was reduced to £257.1bn as compared to £314.7bn in FY 25/26."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)