27 March 2025
Below is an update from Wilsons following the Spring Statement and recent stock market movements.
Spring Statement Overview
The Chancellor’s Spring Statement, delivered yesterday, contained fewer headline-grabbing announcements than the Autumn Budget. For most clients, there will be limited direct impact. Speculation around further taxation, frozen income tax thresholds or changes to the ISA allowance did not materialise.
Here are the key points:
- Economic Growth Forecasts:
The Office for Budget Responsibility (OBR) now forecasts UK growth to be closer to 1% in 2025, down from the previous 2% estimate. However, longer-term projections have improved, with growth expected to average around 1.8% from 2026 to 2029. - Inflation & Interest Rates:
Inflation is now expected to average 3.2% in 2025, higher than the previous 2.6% forecast. The government still aims to return to the 2% target by 2027. This means interest rates are likely to remain higher for longer, impacting both borrowers and savers. The Bank of England is expected to reduce rates to around 3.8% by mid-2026. - Wage Growth:
Wage growth is currently at 5.9%, outpacing inflation. This suggests that many households may feel better off — although this will be less true for mortgage holders who are seeing higher monthly repayments. - Housing & Planning:
Changes to the planning system are set to enable the construction of 170,000 new homes over five years, contributing an estimated 0.2% to economic growth by 2033. - Public Finances:
Higher-than-expected debt servicing costs have reduced the government’s financial buffer, making the balance between spending and taxation more delicate. - Government Spending Changes:
- Defence spending will rise to 2.36% of national income, funded by reduced overseas aid.
- Public services will see slower growth, with real-terms increases at 1.2% per year, down from 1.3%.
- The Civil Service is expected to cut 10,000 jobs, saving 15% on admin costs.
- Welfare reforms will reduce support for some households. By 2030, 3 million families are projected to be £1,720 worse off annually, while 3.8 million could gain around £420 a year.
Market Volatility: What’s Happening and What It Means
Recent global market volatility has been driven, in part, by comments from Donald Trump about proposed trade tariffs. While the immediate impact has been felt in the US, UK investors are also reassessing the risks and opportunities.
Short-Term Volatility
Sectors such as manufacturing and commodities have been hit hardest, with inflationary pressure and economic uncertainty increasing. These factors could influence the Bank of England’s interest rate decisions.
However, volatility also presents opportunities — especially for long-term investors. Market corrections can create openings to invest in strong businesses at lower valuations.
Long-Term Perspective
As global trade dynamics shift, UK businesses may diversify supply chains and trading partners. More stable sectors — such as healthcare, financial services and consumer staples — tend to hold up better during these periods of uncertainty, reinforcing the value of a diversified investment strategy.
Your Investments: Stay Focused on the Long Term
We understand that short-term fluctuations can feel unsettling. But market cycles are a normal part of long-term investing. Your portfolio has been built with resilience in mind, and we continue to monitor developments closely.
If you have any concerns or would like to talk through your plans, please don’t hesitate to get in touch. We’re here to support you every step of the way.