Britain’s near-term economic outlook is already “highly uncertain” despite fresh forecasts published alongside the Spring Statement, according to the Resolution Foundation.
The think-tank said projections released following Rachel Reeves’s statement on Tuesday risk being overtaken by events, given the escalating Iran conflict and instability across the Middle East.
Ruth Curtice, chief executive of the Resolution Foundation, said: “The immediate economic outlook for Britain is highly uncertain, with yesterday’s forecasts already looking out of date, while the living standards picture for the rest of the Parliament is very lopsided.”
The Office for Budget Responsibility (OBR) has revised down its growth forecast for 2026 to 1.1 per cent, compared with the 1.4 per cent predicted in November.
However, projections for 2027 and 2028 were increased slightly from 1.5 per cent to 1.6 per cent.
Despite near term volatility, the Foundation said the coming year is set to bring some improvement for household finances, particularly for lower income families.
Ms Curtice said: “This coming year is set to be a decent one for living standards, and a bumper one for poorer families, as wages and benefit support rise above the level of inflation.”
Wages and state support are forecast to grow faster than prices over the next 12 months, easing pressure after a prolonged period of cost of living strain.
Britain’s short-term economic outlook is already ‘highly uncertain’
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The Foundation cautioned that this recovery remains vulnerable to external shocks.
Ms Curtice said: “But a fresh energy price shock risks puncturing this good news.”
Households are due to see some short term relief through a reduction in the energy price cap taking effect on April 1.
Beyond the next year, the outlook for living standards was described as significantly weaker.
The Iran war has caused major disrupton across the globe
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“With wage growth set to tail off, the living standards picture for the rest of the Parliament is bleak.”
The Foundation said policymakers face the challenge of managing immediate economic uncertainty while supporting longer term growth.
Ms Curtice added: “This should remind policymakers of the need to both navigate near term uncertainty and support productivity-based economic growth over the medium term.”
She added stronger productivity growth is essential to deliver sustained improvements in household incomes across the country.
The Spring Statement contained no changes to taxation or public spending, following Ms Reeves’s pledge to hold a single major fiscal event each year.
The Strait of Hormuz is a key shipping lane
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The Government rejected suggestions it had diluted its ambition to achieve the strongest sustained growth in the G7.
Chief Secretary to the Treasury, James Murray, told Sky News: “We stand by that that is our commitment, we want to aim for that, but we know that change takes time, we know that things aren’t going happen overnight.”
He pointed to falling inflation, lower borrowing, reduced debt interest payments and rising business investment as indicators that the economy could outperform official forecasts.
On developments in the Middle East, he said: “It’s early days in terms of what’s happening in the Middle East, we’re all very concerned about what’s happening and, as a Government, we’re monitoring very closely.”