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What hopeful economic news means for the upcoming Spring Statement
Last year was not so much a case of adverse indicators about the UK economy, more a matter of frustratingly marginal progress against the government’s avowed top priority of stimulating sustained and sustainable growth. The mood was characterized by the heavy use of phrases like ‘bumping along the bottom’ and words such as ‘sluggish’ and ‘turgid’.
February’s economic statistics are suddenly turning more positive, although not quite all of them unfortunately. A clear lack of confidence among both consumers and business leaders could be about to be reversed after 15 months of being battered by the successive tax raising Autumn Budgets of 2024 and 2025.
We have a sharp fall in CPI inflation, a plunge in government borrowing and a noticeable drop in business failures. At the same time, GDP is still hardly moving and unemployment numbers are rising. As the Chancellor’s next opportunity to twitch the economic tiller approaches with her Spring Statement in the first week of March, we asked Nick Hood, Senior Adviser at Opus Business Advisory Group what impact these conflicting indicators may have on his thinking.
Business Failures – down
“After intermittent rises during 2025, company insolvency filings have taken a decisive downturn in January 2026. The figures for calendar year 2025 were almost exactly the same as for 2024 at 25,526 for the whole of the UK. But looking at January 2026 as a standalone month shows a different trend. There were 1,709 insolvencies, which was 16% lower than January 2025. This followed a fall of 8% year-on-year for December 2025.”
“Drilling down into the detail, there are some surprising variations between different business sectors, especially those thought to have been the most seriously affected by the last two Budgets. Despite the warnings of Armageddon, Hospitality insolvencies in December 2025 (the most recent sector analysis) were down by 9% and Retail dropped more than a quarter. Construction and Manufacturing failures were 9% and 18% lower, respectively. Against the general significant downward trend, two sectors actually saw higher failures: logistics were 53% higher and professional services 3% more.”
“A fully detailed analysis of what is happening in these, and other sectors is beyond the scope of this commentary, but there are good grounds for the government to assume that post-Covid insolvencies have finally peaked and are heading down to lower levels, subject of course to any more major geopolitical shocks.”
Inflation – down
“UK inflation tumbled to 3% in January 2026, down from 3.4% in December 2025. The slowdown was in line with the majority of economists’ forecasts and marks the lowest level since March 2025. The Office for National Statistics (ONS) said that falls in petrol prices, air fares and food had driven the drop. In a welcome boost for consumer budgets, the rise in prices for food and non-alcoholic drinks slowed sharply to 3.6% in the year to January, down from 4.5% in December, reaching a nine-month low.”
Government borrowing – down
“ONS statistics for government borrowing show the biggest ever budget surplus of £30.4 billion in January 2026 after a large increase in self-assessment and capital gains tax receipts. This was double the surplus recorded in January 2025. The figure is the largest monthly total since records began in 1993 and much higher than the forecast of £24 billion by the Office for Budget Responsibility (OBR) and a poll of economists.”
Labour force numbers – mixed
“Unemployment in the UK rose to 5.2% at the end of 2025, its highest rate in nearly five years, according to the ONS. But a sharp generational divide is highlighted by the worrying news that unemployment for those aged between 16 and 24 had risen to 16.1%, its highest in more than ten years.”
“For those in work, wages are still rising faster than prices, but the rate at which they’re growing continued to slow. Earnings rose by 4.2% or 0.8% after taking inflation into account. Vacancies are static at 726,000.”
GDP – stalled
“The economy grew by 0.1% in the final quarter of 2025, 0.1% in the month of December, and 1.3% overall in 2025. The annual figure is higher than the 1.1% recorded in 2024, but it’s hardly anything to get excited about. The long-term average pre-Covid was over 2%.”
“There was a strong performance from the manufacturing sector in the final quarter, while the construction industry showed continued weakness and the key services sector flatlined for the first time in two years.”
What now for the Spring Statement?
“The sharp fall in inflation is widely expected to prompt the Bank of England’s Monetary Policy Committee to cut interest rates when it meets next on 19 March. This is after the Spring Statement, but this factor will play into the economic analysis underlying the decisions made by the Chancellor and the forecasts prepared for her by the OBR.”
“The Chancellor has said that the Statement will not be a full Budget or include major tax changes and that any major decisions on tax and spending are being reserved for the Autumn Budget. Instead, it will offer an update on the economy. Nevertheless, it will undoubtedly set the tone for the next six months and beyond.”
“The most crucial outcome is likely to be its impact on consumer and business confidence. The reaction of business leaders is particularly important. An apathetic shrug from the business community will condemn the UK to yet another year in the economic slow lane. A metaphorical standing ovation could at last be the stimulus for the increased business investment that is so desperately needed. Which will it be? We’ll soon know.”