Spring Budget Reflections
From Chris Turner, Head Of Research
We had hoped for something new from today’s spring statement but sadly we were all disappointed. Clearly the impact of the latest war in the Middle East on oil and gas prices could not be factored into the statement but nonetheless we all know that it will have most certainly an inflationary impact over the next few weeks.
The Spring Statement did not include any new policy measures targeted directly at businesses, such as permanent rate relief increases or new tax breaks, despite the hopes of several vastly different business groups. It appeared as much as anything else a self-reflective piece of economic update rather than a tax-cutting business-boosting fiscal plan.
The OBR’s updated forecasts suggest slower growth this year (GDP ~1.1%) with cautious consumer spending, which is typically bad for discretionary retail sales. Inflation is forecast to fall further, although we have yet to see the impact of oil and gas prices, and lower inflation can improve real household incomes and potentially support consumer demand in 2026–27. Unemployment is expected to rise this year, and weaker labour markets dampen consumer confidence and spending power, which historically reduces footfall and sales on the high street.
Many of us were pushing the Chancellor to reduce business rates more substantially, because many are facing substantial bills in April due to revaluation and rising multipliers. This was not to be. Thus, many high-street shops and food and beverage businesses will see higher operating costs later this year, and some may have to respond by reducing staff hours, delaying investments, or raising prices, placing further pressure on footfall and profitability.
At the same time, broader cost-drivers will affect high-street profitability. The planned end of the temporary fuel duty cut means fuel costs for deliveries and logistics will rise starting later in 2026 and increasing distribution costs for many retailers. If energy costs rise further due to the Middle East conflict business energy bills may rise again.
The Chancellor highlighted expectation of people being “better off” over the Parliament, partly due to lower interest rates reducing mortgage payments, and inflation easing faster than previously forecast.
We can but hope and plan ahead.
Professor Christopher Turner, Head of Research, British BIDs
