Good morning. In a world where events often dictate economic policy, Chancellor Rachel Reeves is poised to address the latest official assessment of the UK economy today. The Office for Budget Responsibility's Spring Forecast, released this afternoon, arrives amid a backdrop of surging energy prices that threaten to overshadow any positive fiscal news.
Economic Stability Meets Global Turmoil
Economists anticipate that the forecast will show the UK adhering to the OBR's fiscal projections, buoyed by a record budget surplus in January. Additionally, inflation is expected to continue its downward trajectory toward target levels. However, these predictions are already being challenged by recent developments in the Middle East.
Energy Crisis Reignites Inflation Fears
Yesterday, liquefied natural gas prices surged by over 40%, and oil prices jumped 6%, following disruptions in production. Qatar's state-run energy firm halted LNG output, while Saudi Arabia temporarily shut down units at its Ras Tanura oil refinery after attacks by Iran. These moves, occurring as the US-Israel conflict with Iran intensifies, risk reigniting the cost-of-living crisis in the UK.
As Investec economists explain, higher energy prices could significantly boost inflation. For instance, current oil price levels could add approximately 0.2 percentage points to headline inflation through increased petrol costs. A sustained 40% rise in natural gas futures might contribute an additional 0.7 percentage points via higher household utility bills.
Chancellor's Response and Policy Outlook
No major policy changes are expected today, as the government has committed to holding only one major fiscal event annually in the autumn. Hence, this is billed as the 'spring forecast' rather than a 'spring statement'. Chancellor Reeves is likely to emphasize that the government has the "right economic plan for the country" in an increasingly uncertain global environment.
She is expected to tell MPs: "Stability in the public finances, investment in infrastructure, and reform to our economy. Building growth not on the contribution of a few people or a few parts of the country, but in every part of Britain with a state that doesn't stand back, but steps up."
Today's Economic Agenda
- 8am GMT: Worldpanel supermarket inflation and sales figures
- 9.30am GMT: ONS data on Mergers and Acquisitions involving UK companies (October to December 2025)
- 10am GMT: Flash estimate of eurozone inflation in February
- 12.30pm GMT: Spring forecast statement from Chancellor Rachel Reeves
- 1pm GMT (roughly): Office for Budget Responsibility's spring forecasts published
- 2.30pm GMT: Office for Budget Responsibility press conference
