The private sector experienced significant growth in March, reaching its highest level in six months. The S&P Global Flash UK composite purchasing managers’ index (PMI) rose to 52 from 50.5 in February.
Nevertheless, the Office for Budget Responsibility (OBR) has revised down growth forecasts for 2025 from 2% to 1%.
However, it has upgraded its growth forecast for next year and every year thereafter. It predicts GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.
Meanwhile, the Bank of England held interest rates at 4.5% at its meeting in March, after warning that global economic uncertainty has “intensified”.
It means rates are at their lowest level for more than 18 months following a reduction from 4.75% in February – the third cut since August 2024.
In today’s Spring Statement Chancellor Rachel Reeve said Labour is abiding by its self-imposed fiscal rules and moving from a deficit of £36.1bn in 2025/26 to a surplus of £9.9bn by 2029/30 – adding that the Treasury will hit its target of bringing in more than it spends “two years ahead of schedule”.
The OBR says Reeves has restored the government’s headroom- which gives the chancellor leeway to cut taxes or increase spending in the future – by setting out cuts and reforms in today’s statement.
So it’s a mixed picture in the short term but there are glimmers of light on the horizon in the medium term.