Rachel Reeves has insisted Labour has “the right economic plan” as she delivered a spring forecast that downgraded growth for this year. The chancellor addressed MPs against the backdrop of surging energy prices, with investors fretting over the impact of the war in the Middle East.
New forecasts from the independent Office for Budget Responsibility (OBR) showed that the conflict could have “very significant impacts” on the global and UK economies. The OBR also reported that UK unemployment is set to peak higher than feared, while the tax take heads for a record high of 38.5% of GDP by 2030-31.
Reeves conceded that GDP growth was now expected to be “slightly slower” this year, down to 1.1% from the previous forecast of 1.4%. However, the chancellor noted that inflation is down, borrowing is down, living standards are up, and the economy is growing. Her headroom to keep within fiscal rules has risen slightly, but economists warned that extra headroom could be wiped out by the jump in energy prices caused by the Middle East crisis.
Oil prices continued to climb, with Brent crude up 6.2% at $82.55 a barrel, and UK month-ahead gas prices jumped 21% to a three-year high. Stock markets fell across the world, with the FTSE 100 losing 2.75%—its biggest one-day fall in 11 months.
Separately, an investor-led “AI panic” saw the share price of Reach, the owner of the Mirror, Express and Star, plunge over 12% after the publisher said that traffic from Google has almost halved. Reach reported that digital revenues declined by 0.9% to £128.9m, with overall digital page views falling 8% year-on-year, primarily due to a 46% decline in traffic from Google in the second half of its financial year.
The publisher said it is taking a “cautious approach” to digital performance this year and does not expect to provide hard numbers until potentially its half-year results. The impact of Google’s AI Mode and AI Overviews has prompted fears of a “Google zero” future where traffic referrals dry up.
