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[PRIMER] UK Spring Statement, Chancellor Reeves' update is set to be a non-event, but the OBR & DMO forecasts, and implied headroom, will be of note.

Newsquawk Staff ·

  • UK Chancellor Reeves will present her Spring fiscal update from 12:00GMT (likely at c. 12:30GMT), followed by OBR forecasts and the DMO remit, set to be published once the Chancellor concludes her statement. Thereafter, the government will hold a technical briefing at around 13:30GMT and then the OBR will brief at 14:30GMT.
  • The government has changed the format so the OBR will only assess adherence to fiscal rules, i.e ‘headroom’ and whether debt will be falling as a share of national income by the end of the term, in the Autumn Budget. Despite this, the forecasts provided by the OBR mean it will be possible to estimate the headroom. In November 2025, headroom was GBP 21.7bln. Generally, desks expect it to remain roughly around this mark.
  • The main factors influencing it are likely to be near-term funding for SEND, investment that will cost GBP 3.4bln over three years, recent yield moves and recent PSNB data. Chancellor Reeves has made clear that she wants this to be a non-event for markets, the FT quotes a minister as saying it will be a “very, very boring Spring Statement…”; underscoring this, the speech is expected to last for no more than 20 minutes. A speech expected to be pro-growth and followed by another speech later in the month. Aside from SEND, no new spending or tax adjustments are expected. However, recent reporting around a faster path to 3% defence spending and/or the student loan situation could feature, though the base case remains for nothing new; on the latter, Politico sources this morning suggest that Labour-aligned think tanks are working on options for the student loan issue. Alongside the OBR release, the DMO will provide its FY26/27 financing remit. The FY25/26 Gilt remit was GBP 303.7bln, and Morgan Stanley expects this to drop to GBP 252bln for FY26/27. Within that, the closely watched long allocation is expected at around GBP 20bln, down from GBP 31.3bln in the prior period. A remit that should support Gilts.
  • The weekend's Middle East escalation has seen a jump in global yields, a paring of BoE easing odds, and the UK 10yr yield lifting from 4.30% on Friday to 4.49% as we count down to the statement, a move that would theoretically hit the headroom Reeves has. However, the OBR will not be providing a formal assessment, and the calculation period for the analysis underpinning it would have closed before the weekend's events. Nonetheless, the energy moves we are seeing may need to be addressed by the government at some point, though there is no firm indication that anything will arise in today's statement.

Forecasts

  • 2026 growth: OBR prev. 1.4%, BoE (Feb) 0.9%, consensus. c. 1.0%
  • 2027 growth: OBR prev. 1.5%, BoE (Feb) 1.5%
  • 2026 inflation: OBR prev. 2.5%, 2.0%
  • 2027 inflation: OBR prev. 2.0%, 1.8%
  • Headroom (won't be formally provided): OBR prev. 21.7bln, consensus 20-25bln
  • DMO remit, FY26/27: exp. c. 250bln, MS exp. 252bln. FY25/26 was 303.7bln
  • DMO, long allocation: MS exp. 20bln. FY25/26 was 31.3bln.

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