Spring Statement & OBR Outlook

The Chancellor, Rachel Reeves, has made her Spring Statement to Parliament. The spring statement is not a formal budget – as Labour pledged to only deliver one per year – but rather an update on the economy and any progress since her fiscal statement last October.

At the same time as the statement, the OBR (Office for Budget Responsibility) issued their Economic and fiscal outlook, where they revised the UK’s economic growth forecast for 2025 down to 1%, a decrease from the previous 2% estimate. Modest improvements are anticipated in subsequent years. Inflation is projected to peak at 3.2% in 2025 before declining to 2.1% in 2026.

The full OBR report can be seen here, and a summary can be seen at the end of this article.

In the statement, the Chancellor included several key measures for housing:

£2 billion investment in affordable housing, aiming to build 18,000 affordable and social homes.
Part of a broader goal to construct 1.5 million homes during the current parliament.
The government is focusing on housing supply and affordability to address the UK’s housing crisis.

These measures are intended to support lower-income households and improve housing accessibility.

She also pointed to a £600m investment announced earlier by the Education Secretary to train 60,000 additional construction workers, alongside plans for 10 new technical excellence colleges across Britain to empower workers.

There was no assistance for the Renters’ Rights Bill announced, so no assistance for courts; in fact, the Ministry of Justice, along with other unprotected departments, is expected to face real-term funding reductions of approximately 1% per year in the upcoming spending review. Legal professionals have expressed concerns about the lack of substantial investment in the justice system, highlighting the need for adequate resources to ensure its effective functioning.

She did announce an £8 million allocation aimed at reducing administrative burdens for probation officers, enabling them to spend more time on frontline duties. So, there’s a small amount for the courts.

Other matters announced were:

Welfare: The government plans to achieve £3.4 billion in savings from welfare cuts by 2029-30.
Public Spending: There will be a reduction in the growth of departmental spending, with an average cut of 4.7% across departments. Additionally, a 10% reduction in civil service jobs is targeted.
Defence: An increase of £2.2 billion in defence spending is allocated from April to support advanced military technologies and refurbish the defence estate.
Surplus Projections: The fiscal outlook indicates a projected surplus starting from 2027-28, with day-to-day spending expected to align with revenues by 2029-30

It is worth noting that the Spring Statement comes on top of a number of Government announcements related to our industry in the last two weeks (and we’re expecting more to come by the end of the week), including:

A ‘Regulation Action Plan’ to reduce the number, complexity and scope of regulators and regulation;
A one-year delay to the introduction of the Building Safety Levy to Autumn 2026 (see item below);
An extra £2bn of funding to deliver 18,000 affordable homes by 2028, as a ‘down payment’ on the Comprehensive Spending Review in June; and
£600m to train 60,000 new construction workers and deliver 10 technical excellence colleges

Finally, the Chancellor declined to rule out hiking taxes at her next Budget in response to speculation she will be forced to find more money to balance the books. Saying “I’m not going to write four years of budgets; I’ve just delivered a spring statement today”

Summary of the OBR outlook

Economic Growth:

The OBR has downgraded the UK’s GDP growth forecast for 2025 to 1%, down from the 2% predicted in October 2024. This revision reflects increased global economic uncertainties and potential challenges in 2025. However, growth forecasts for subsequent years have been upgraded due to anticipated higher investment spending.

Inflation:

Inflation is projected to average 3.2% in 2025, peaking at 3.7% in mid-year, driven by higher energy and food prices, as well as wage growth.

Public Finances:

The UK deficit is projected to be £36.1 billion in 2025-26, with expectations of a transition to a surplus of £9.9 billion by 2029-30.
Government borrowing is projected to be £47.5 billion higher than anticipated in October’s budget, while debt interest spending is expected to remain stable as a share of GDP.

Tax and Spending:

The tax burden is anticipated to reach a record 37.7% of GDP by 2027-28.
The Chancellor announced £14 billion in welfare cuts and an additional £2.2 billion in defence funding.
A £1 billion investment aims to promote employment, accompanied by £400 million for the Department for Work and Pensions.
Overseas aid will be reduced, saving £2.6 billion by 2029-30Household Income:

Real household disposable income per person is expected to grow by an average of around 0.5% annually from 2025-26 to 2029-30, slightly higher than previous forecasts due to stronger wage growth.

These projections underscore the challenges and adjustments in the UK’s economic landscape, influenced by both domestic policies and global economic conditions.