UK Growth Forecast Halved, Inflation Falls, and U.S. Leaked Signal Chat

Key Takeaways

• Highlights of UK Spring Statement
• Inflation Falls
• U.S. Signal Chat leaked
• March Economic Roundup

Highlights of Spring Statement

The UK Spring Statement 2025 was delivered by Chancellor Rachel Reeves on 26 March 2025. The aim of the UK Spring Statement 2025 is to outline the government's economic plans and fiscal policies for the upcoming year. The Labour government has reiterated that these tough cuts are necessary because they inherited a £22 billion 'black hole' from the Conservatives.

You can read the full transcript provided on the Gov.UK website. (See Source) We have condensed the transcript into a bitesize summary that provides all the important key takeaways in under 2 minutes.

• UK growth Forecast for 2025: Rachel Reeves has announced the forecast has changed from 2% to 1%
• Real Household Disposable Income Per Person: Expected to grow by an average of around 0.5 percentage points (around £500 a year better off) from 2025-26 to 2029-30.
• Universal Credit Health Element: Cut by 50% and frozen for new claimants.
• Universal Credit Standard Allowance: Increase from £92 per week in 2025-26 to £106 per week by 2029-30.
• Office For Budget Responsibility estimates the new welfare savings package will save £4.8bn.
• 250,000 more people - including 50,000 children - will be pushing into poverty as a result of the welfare by 2030.
• UK Government pledge to spend 2.5% of GBP by 2027 on defence spending (£2.2bn more next year).
• UK Government will increase the number of tax fraudsters charged each year by 20% (raises extra £1bn).
• Overall day-to-day spending across UK government will be cut by £6.1bn in 2029-30.
• New Transformation Fund - brings £3.25bn of investment that public services need.
• House Building: Real GDP growth increase by 0.2% in 2029-30 as a result of Labour planning reforms on house building, expected to hit 40-year high.
• Voluntary Redundancy Scheme for Civil Servants (Delivers £3.5bn in day-to-day savings).

Result of statement

• The yield for UK 30-year bonds, known as gilts eased.
• There was a dip in the value of the pound which lost three tenths of a cent against the US Dollar and the Euro.
• UK inflation target is expected to be reached by 2027.

Inflation Falls To 2.8%

In a surprising turn, UK inflation fell more than expected in February, driven by significant drops in the prices of clothing and shoes due to much higher sales. In January, inflation was at 3%, but it has now fallen to 2.8% in February, indicating a more promising pathway to lower inflation. This could increase the likelihood of the Bank of England cutting interest rates in April.

However, prices are anticipated to climb in the coming months, with council tax, energy, and water bills all scheduled to increase in April. Additionally, a recent survey by the Office for National Statistics revealed that nearly half of businesses are contemplating price hikes as they prepare for next month's tax increases and the rise in the National Living Wage.

U.S. Signal Chat Raises Concerns About National Security

A Signal chat involving top U.S. officials was accidentally leaked, revealing discussions about military strikes on Yemen.  A review by the National Security Council is underway. (See Source)

Accidental Inclusion: Jeffrey Goldberg, editor-in-chief of The Atlantic, was accidentally added to a Signal group chat with senior U.S. government officials
Content of the Chat: The chat included discussions about forthcoming U.S. airstrikes on Houthi militants in Yemen.
Security Concerns: The incident raised concerns about national security and the handling of sensitive information.

White House Response: The White House downplayed the event, stating that no classified information was shared.

March Economic Roundup

Recent developments in international trade, finance, and economic policies have seen significant actions and announcements from President Trump, impacting various sectors and global markets.

Trump Pauses Tariffs on Canada and Mexico: The White House has announced that its widely discussed reciprocal tariffs, which target nearly all US trade partners, are still in progress. The specifics will be revealed on 2 April, with rates designed to counteract policies from other countries that officials deem unfair.

Ukraine US Mineral Deal Collapses: Volodymyr Zelensky indicated that Ukraine was prepared to sign an agreement with the US regarding the country's mineral deposits. However, there was a heated exchange with Donald Trump and US Vice-President JD Vance. This led to Zelensky being asked to leave the White House.

Crypto Summit: US President Donald Trump met with leaders of the cryptocurrency industry at the White House on Friday, hosting an unprecedented summit focused on his plans for a government-owned reserve of digital assets. A key topic was Trump's objective to create a strategic reserve of bitcoin, formalised in an executive order on Thursday, which also included other digital assets.

Gold hits New All-Time-High of $3,000: A weakened USD and global tariffs have driven gold prices to a new all-time high in US dollars.

Trump’s Tariffs: Trump has made further threats, including a recent announcement of 25% tariffs on car imports to the US, set to take effect on 2 April 2025. Additionally, the US President has expressed a temptation to impose a 200% tariff on alcohol imported from the European Union.

Canadian Steel: Initially threatening a 50% tax, Trump proceeded with a 25% tariff.

Santander Closes 95 Branches: Up to 750 jobs are at risk at Santander bank under plans to close nearly a quarter of its high street branches. The high street lender has announced plans to close 95 of the bank's existing 444 UK branches.

UK Wage Growth Holds Steady at 5.9%: Annual growth in average weekly earnings, excluding bonuses, held at 5.9 per cent in the three months to January.

Federal Reserve Rate: The benchmark for federal funds remains between 4.25% and 4.5%.