The Spring Statement was bigger and more pessimistic than the Labour government would have liked – even if it wasn’t close to an ‘emergency budget’ that it was referred to by the Opposition government. It was preceded by the ‘leak’ of cuts to sickness and disability benefits, but fundamentally there were no changes to tax policy.
A few hours prior to the announcement, the inflation data release saw CPIH reduce to 3.7%, down from 3.9% a month previous; and CPI growth decrease to 2.8%, down from 3% in the 12 months to January. Similarly, Core CPI rose by 3.5%, down from 3.7% a month previous. Market assumptions now shift that lower inflation will result in a cut to the base rate at the next MPC meeting.
The OBR forecasts were downbeat, with the economic forecast downgraded to 1%; rebounding to 1.9% in 2026.
Furthermore, as a result of welfare changes, this will likely impact household spending for low-to-middle income families. Savings to disability benefit were projected to be the biggest savings over the course of the government. This feels like a cause for concern.
Despite the suggestions that the ‘world is changing’, the tightening to the tune of 0.3% GDP was relatively marginal but reverses some of the fiscal loosening from the last budget – and essentially keeps the Chancellor within the fiscal rules for now, with the widespread 20% tariffs potentially cutting headroom further. This should mean relatively little market movement (which at time of writing was the case). The FTSE 250 dipped and rebounded quickly.
This was one for the big picture, and keeping an eye on purse strings. Business Rates reform was pushed back to later in the year. In summary, little for real estate as a whole but here’s what the Spring Statement means for...
Housing & Infrastructure
Improved commitment to affordable housing is good news as the current Affordable Homes programme comes to an end. However, while the investment is being lauded, £2 billion and 18,000 new social and affordable homes doesn’t move the dial significantly.
In better news - there was a commitment to training 60,000 young people by 2029 across the construction sector. There is an additional £100 million to deliver Technical Excellence College specialized in construction.
The OBR forecasts suggest that house prices will increase by 2.8% in 2025 and average 2.5% after.
There was no u-turn or extension on next week’s stamp duty deadline.
An extra £13 billion was pledged on further infrastructure spending.
Defence spending
There is a commitment to increase NATO-qualifying spending to 2.5% of GDP by 2027. Increases in defence have been partially accounted for by savings on Foreign Aid – with some of those cuts aimed on cutting spending on housing asylum seekers.
While an increase in defence spending should increase manufacturing – the full details are yet to be announced but Glasgow, Derby and Newport were namechecked. This is where defence spending currently goes.
£400 million of MOD spending is to be ringfenced for innovation.
Public sector
There was an announcement of a £3.25 billion transformation fund to reform the public sector through AI and technology; including £150 million for projected redundancies. £42 million is allocated for three pioneering AI projects led by DSIT to make government operations more efficient and effective.
As forewarned, NHS England is abolished and brought back into DHSC.
Business
The rise in the National Living wage is good for workers and consumers but adds further pressures to businesses who are getting ready to adapt to additional cost in April.
