Chancellor Rachel Reeves has signalled she intends to stay in her role despite the Labour leadership contest, after better-than-expected GDP figures boosted her standing. The economy grew by 0.3% in March, defying City forecasts of a 0.2% contraction, and 0.6% in the first quarter of 2026 – making Britain the fastest-growing G7 economy.
In a statement, Reeves said: “Now is not the time to put our economic stability at risk. To do so would leave families and business worse off.” The remarks were seen as a direct appeal to both external critics and internal rivals, as Wes Streeting and Angela Rayner prepare leadership bids.
City bond traders believe Reeves’s reputation for fiscal prudence could help calm gilt market volatility, strengthening her case to remain chancellor under a new prime minister. However, economists warn that the strong first quarter may not last, with many predicting weaker growth in the second half of the year due to the ongoing Middle East conflict.
The Bank of England is expected to raise interest rates to combat rekindled inflation, adding pressure on mortgage holders and businesses. Meanwhile, the Resolution Foundation estimates the Iran war will cost typical households £550 this year and increase government borrowing by £16bn by 2030.
Despite promising targeted support, Reeves has yet to announce significant measures to cushion the impact of rising energy prices, citing affordability constraints. The next prime minister will face the challenge of navigating this precarious economic backdrop.
