Middle East conflict overshadows Spring Statement

At a glance

  • The OBR has updated its growth forecasts for the UK economy. It has downgraded growth in 2026 from 1.4% to 1.1%. However, it predicts faster annual growth of 1.6% for 2027 and 2028, and 1.9% for 2029 and 2030.
  • Expectations of an interest rate cut in March have fallen substantially following the conflict in the Middle East.
  • Inflation is predicted to reach the government’s 2% target by the end of 2026.

Chancellor Rachel Reeves has delivered her Spring Statement against the backdrop of intensifying conflict in Iran and the Middle East. 

Reeves hailed the improved growth forecasts published by the Office for Budget Responsibility (OBR), saying this was evidence that her economic plan was working.

But growing uncertainty around rising oil prices due to the war in Iran, and the knock on impact for inflation and interest rates, could yet derail growth. Improved forecast for UK growth

Reeves delivered her Spring Statement on 3 March. She unveiled the OBR’s improved forecast for UK growth, which it estimates will reach 1.9% by 2029, albeit with a downgrade for 2026 from 1.4% to 1.1%.

The government hopes the figures indicate the green shoots of economic recovery. But the OBR was clear to include a strong caveat to its research, stating the conflict in the Middle East had escalated while it was finalising its report. It added the conflict could have ‘very significant impacts on the global and UK economies.1

Following the escalation of the conflict and fears over oil prices and inflation, market experts are now less bullish about the prospect of an interest rate cut by the Bank of England when its monetary policy committee (MPC) meets next to decide on rates on 19 March.

Inflation is predicted to reach the government’s 2% target by the end of the year, according to the OBR report. But again, this is potentially less certain in the light of the situation in the Middle East.

Source
1March 2026 Economic and fiscal outlook – GOV.UK

SJP Approved 03/03/2026

Insights
Investor Watching The Change Of Stock Market On Notebook
Investment Insights: The ‘curse’ of the winner

Welcome to the latest issue of our quarterly investment insights newsletter from Chief Executive Officer for Investments Justin Onuekwusi. The winner’s curse The danger of chasing past performance In the 1970s, researchers at an oil company noticed something strange about auctions for drilling rights in the Gulf of Mexico. The companies winning the auctions were […]

Read More
Insights
Young Family Having Breakfast Together And Being Messy In The
The missing years: caring, career pauses and long-term planning

At a glance Women are more likely than men to take a career break (56% vs 38%), but it can come at a financial cost.2 Career breaks can affect earnings, pension savings and long-term financial security, while also making the return to work more challenging. Understanding the potential impact and planning ahead can help women […]

Read More
Insights
A street of red brick terraced houses
Autumn Budget 2026 – with a month to go, what lies ahead?

With less than four weeks before the chancellor John Healey stands up to give his first Budget, leaks about what might be announced have been few and far between. The lack of rumours has also led to a notable reduction in speculation, which has been welcomed by both SJP and markets. The panic seen in […]

Read More

View All

Pick up the phone.
Drop us an email.
Stop by for a cuppa.

Our team is here for you, whether you’ve been a client for as long as you can remember or you’re stepping through our door for the first time. We’re always happy to help, and can’t wait to hear from you.

Contact Us

Join us on social

Edinburgh

Head Office
Verdant Building, 2 Redheughs Rigg,
Edinburgh ,
EH12 9DQ

T: 0131 510 8610

Inverness

7 Connel Court, Ardconnel Street,
Inverness,
IV2 3EY

T: 01463 221 221

Inverness

Third Floor,  Suite 3A1, Metropolitan House, 31-33 High Street,
Inverness,
IV1 1HT

T: 01463 258058

London

Number 33,
St. James's Square
London,
SW1Y 4JS

T: 0131 510 8610

Email us: [email protected]

 

Let's Chat!

If you'd like a no-obligation call with one of our advisers fill in the form below and we'll be in touch. Your financial journey starts here!