Chancellor Rachel Reeves has delivered a low-key Spring Statement, confirming a downgrade to near-term growth while pointing to slightly stronger public finances and rising tax receipts from insurance customers.
The Office for Budget Responsibility (OBR) now expects UK GDP to grow by 1.1% this year, down from 1.4% in its November forecast. Growth is projected to pick up to 1.6% in 2027 and 2028, before easing to 1.5% in 2029 and 2030. Reeves told MPs that war in the Middle East has made the outlook “yet more uncertain”.
The OBR expects inflation to average 2.3% this year, before returning to the government’s 2% target from 2027. That should relieve some cost pressure on households and businesses, but the improvement comes alongside a weaker labour market.
Unemployment is forecast to rise to a peak of 5.3% this year, higher than the 4.9% peak projected in November, before gradually falling to around 4.1% by 2030.
For insurers, a cooler labour market and inflation closer to target should help contain wage and claims‑cost inflation over time, but slower growth and higher short‑term joblessness are likely to weigh on demand for some protection and savings products.
Reeves confirmed that, following changes made last year, the OBR will wait for the main Budget to assess compliance with her fiscal rules. However, the watchdog now estimates that her room for manoeuvre has improved.
Headroom against the rule not to borrow to fund day‑to‑day spending has increased from £21.7 billion to £23.6 billion, largely due to stronger forecast tax receipts. Headroom against the requirement for debt to be falling as a share of GDP has also risen, to £27.1 billion. Borrowing is expected to fall from 4.3% of GDP this year to around 1.8% by 2029–30, while public sector net debt is forecast to peak at about 96.5% of GDP in 2028–29 before edging down.
For the insurance sector, a key detail lies in the OBR’s Insurance Premium Tax (IPT) projections. IPT is now forecast to raise £57.8 billion between 2025/26 and 2030/31, up £0.5 billion from the £57.3 billion expected at the Autumn Budget. The profile shows steady year‑on‑year growth in IPT receipts despite no change in the headline rate.
The upgrade comes alongside new PHIN data showing private healthcare admissions at a record Q3 level, with private medical insurance (PMI) continuing to drive activity.
Broadstone’s head of life and health, Cara Spinks, said the figures highlight how workplace health insurance and cash plans are increasingly used by employers to maintain productivity and retention by securing quicker diagnosis and treatment, and by supporting preventative care. She argued that, by not offering tax incentives to encourage wider take‑up of PMI in line with the Keep Britain Working review, the Chancellor has missed an opportunity to tackle economic inactivity and ease pressure on the NHS.
Spinks also warned that rising premiums and the growing IPT burden risk constraining growth in this market, and called for government to revisit the role of IPT and consider targeted relief for health‑related cover.
Average interest rates on existing mortgages are projected to rise from 4.1% this year to around 4.5% by 2030 – a gentler path than assumed in the autumn, reflecting expectations of a lower peak in Bank Rate. Mortgage affordability will remain tight, but a gradual easing in borrowing costs should support housing transactions and, in turn, demand for household insurance over the medium term.
Housebuilding is forecast to decline from roughly 260,000 completions a year in the early 2020s to around 220,000 in 2026/27, before recovering to about 305,000 a year by 2030/31. The government remains off course to meet its target of 1.5 million homes this Parliament, limiting organic growth in the home insurance book even as rebuild costs stay elevated.
Net migration is expected to fluctuate between 200,000 and 300,000 a year over the rest of the decade, slightly lower than previously assumed as more UK nationals are projected to leave. That implies slower working‑age population growth - a modest drag on long‑term premium growth, but potentially some easing of pressure on housing and public services.
For commercial lines and SME‑focused brokers, the statement offered little direct relief. Business rates for many premises are still set to rise by 10% from April’s revaluation, adding to fixed‑cost pressures for high‑street and micro‑firms.
Simply Business UK chief executive Julie Fisher said the headline story of gradual improvement does not match what many small firms are experiencing. She pointed out that small businesses support 16.9 million jobs and generated £45.9 billion in corporate tax last year, yet are facing slowing growth, persistent inflation and rising rates.
According to the firm’s research, costs have risen for 82% of small business owners over the past year, but only 12% have been able to increase prices in line with those costs. Fisher characterised small firms as acting as a “shock absorber” by shielding consumers from price rises at the expense of their own margins.
She also highlighted the human impact, with almost half of owners reporting that financial pressures are affecting their mental health, and around one in five considering using personal savings to keep their business going. Despite this, Simply Business found that 86% of small business owners still say they love what they do. Fisher said the sector remains resilient and optimistic, but needs stability and targeted relief if it is to move from survival to growth.
