The Chancellor’s Spring Statement Over-shadowed by the Iran War

The Chancellor used this week’s Spring Statement to provide an update on economic performance and deliver a pro-growth message, asserting that, “This Government has the right economic plan for our country.” However, the statement has been overshadowed by tensions in the Middle East, with the OBR’s adjusted profile already questionable in the face of new global instability.

The OBR indicates that growth will be slower in 2026 (1.1%) than previously estimated, but will rise to 1.6% in 2027/28 and 1.5% in both 2029 and 2030. Inflation has fallen, interest rates continue to fall, standards of living are rising, with people forecast to be more than £1,000 a year better off by the next election. UK government borrowing has also fallen significantly, driven by strong tax revenues. But for many businesses and households, the Chancellor’s growth message will feel ‘at odds with reality’ after another difficult winter.

Importantly, the forecasts do not take into account any potential impact from the jump in energy prices triggered by the conflict in the Middle East. The OBR have warned that the UK could take a very significant hit with gas prices already spiking at unprecedented levels. This is likely to have a global impact on all economies, threatening growth, and raising inflation. The statement has faced criticism for lacking new, specific measures on energy support, amid warnings that the Chancellor will need to respond to future price volatility. As many commentators have noted, the Iran war leaves the OBR’s forecast not worth the paper it was written on.

No new policies were announced as part of the statement, although the Chancellor did suggest new reforms in the coming weeks. In her second Mais Lecture in the City of London, the Chancellor said she will “set out three major choices that will determine the course of our economy into the future” - citing “our global relationships”, how to “back innovation and harness the power of AI”, and “transforming our economic geography” to “unlock opportunity in every part of Britain”.

With growth already downgraded, unemployment is set to rise – peaking at 5.3% later this year. Unemployment, and particularly youth unemployment, has emerged as an unwelcome political priority over the past year. Earlier policy announcements, including the Youth Guarantee, have had little time to make significant progress, but there is already a sense that with weak growth and a flat labour market, employment prospects for new job entrants are unlikely to pick up quickly. ‘New Deal’-style employment programmes are being called for to arrest the rising problem.

Overall, the East of England remains one of the stronger regional labour markets in the UK, but unemployment is rising modestly and the gap between high-growth areas (e.g. Cambridge) and weaker local economies across the wider region remains a persistent policy challenge. A further slowdown in hiring would hit younger workers and entry-level roles, especially in retail, hospitality, and logistics. This would also reinforce the internal divide across the East.

The region is heavily integrated with national and global markets, particularly through sectors such as life sciences, advanced manufacturing, agriculture, and logistics. The Spring Statement confirmed that the temporary 5p fuel duty cut will end later in 2026, with staged increases afterwards. This has particular implications for the East of England, because many residents rely heavily on car travel in rural areas. The region also has significant agricultural and logistics sectors, both sensitive to fuel costs. Rising energy and transport costs will feed into higher business operating costs and consumer prices.

There are no immediate new regional funding streams or infrastructure commitments, and the route to growth will continue to rely on existing strategies, including science and technology investment around Cambridge and the Oxford–Cambridge corridor. However, continued global instability will impact manufacturing and exports, linked to global supply chains, as well as ports and logistics around Felixstowe and Harwich.

The OBR forecasts, combined with the impact of geopolitical tensions, implies slower growth, rising unemployment, and higher living costs, all of which could seriously challenge economic resilience in the East of England.