Good morning. As the UK braces for the latest economic assessment, Chancellor Rachel Reeves is set to respond to the Office for Budget Responsibility's Spring Forecast this afternoon. The update comes at a critical juncture, with surging oil and gas prices threatening to overshadow any positive fiscal news.
Economic Context and Forecast Expectations
In more stable times, the Spring Forecast might have delivered encouraging updates for the chancellor. Economists anticipated that the UK would remain within the OBR's fiscal projections, buoyed by a record budget surplus in January and declining inflation rates. However, the escalating conflict in the Middle East has rapidly altered the economic landscape, rendering many predictions obsolete before their publication.
Impact of Rising Energy Prices
Recent developments have seen liquefied natural gas (LNG) prices surge by over 40% and oil prices jump 6%. This volatility follows Qatar's state-run energy firm halting LNG production and Saudi Arabia temporarily shutting down units at its Ras Tanura oil refinery due to attacks by Iran. As the US-Israel war on Iran intensifies, these price hikes risk reigniting the cost-of-living crisis in the UK.
Economists at Investec highlight the potential consequences: "The main economic consequence of higher energy prices would be to boost inflation. In the UK, illustratively, the current level of the oil price would, if maintained, add about 0.2%pts to headline inflation via higher petrol prices; and a sustained 40% shift up in natural gas price futures would boost this by a further 0.7%pts or so, via higher household utility bills."
Chancellor's Response and Policy Outlook
With the government committed to holding only one major fiscal event annually in the autumn, no significant policy changes are expected today. Instead, Chancellor Reeves is anticipated to reaffirm the government's economic strategy, emphasizing stability, infrastructure investment, and broad-based growth. She is likely 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
The day's key events include:
- 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 for February
- 12.30pm GMT: Spring forecast statement from Chancellor Rachel Reeves
- 1pm GMT (roughly): Publication of the Office for Budget Responsibility's spring forecasts
- 2.30pm GMT: Office for Budget Responsibility press conference
As global markets react to geopolitical tensions, the chancellor's address will be closely watched for insights into how the UK plans to navigate these turbulent economic waters.
