Rachel Reeves has insisted Labour has “the right economic plan” as she delivered a spring forecast that downgraded growth for this year amid surging energy prices and rising tensions in the Middle East. The chancellor addressed MPs against a backdrop of investor fears over the impact of the Iran conflict, with oil prices climbing 6.2% to $82.55 a barrel and UK month-ahead gas prices jumping 21% to a three-year high.
New forecasts from the independent Office for Budget Responsibility (OBR) showed that GDP growth is now expected to be 1.1% this year, down from the previous forecast of 1.4%, after weaker-than-expected data in the final quarter of 2025. However, growth is forecast to strengthen to 1.6% in 2027 and 2028, and remain unchanged at 1.5% in 2029 and 2030. The OBR warned that the conflict in the Middle East, which escalated as the document was being finalised, “could have very significant impacts on the global and UK economies”.
Reeves said she was in close touch with the Bank of England governor, Andrew Bailey, and would meet representatives of the North Sea energy industry on Wednesday. The UK’s tax take is set to rise to a new record high of 38.5% of GDP in 2030-31, while the chancellor’s headroom against her fiscal rules has increased slightly. Economists warned, however, that the extra headroom could be wiped out by the jump in energy prices caused by the Middle East crisis.
Stock markets fell sharply, with the FTSE 100 losing 2.75% – its biggest one-day fall in 11 months – and the Dow Jones Industrial Average dropping 550 points. Investor sentiment was further hit by an “AI panic” that saw the share price of Reach, owner of the Mirror, Express and Star newspapers, plunge over 12% after the publisher reported that traffic from Google had almost halved. Reach said overall digital page views fell 8% year-on-year, primarily due to a 46% decline in traffic from Google in the second half of its financial year, fuelling fears of a “Google zero” future where traffic referrals dry up.
