Chancellor Rachel Reeves had hoped to deliver a “boring” Spring Statement today that would reassure businesses that stability is returning to the UK economy.
Instead, she delivers the statement against the backdrop of global economic uncertainty, with markets rattled by the ongoing Middle East crisis.
She is expected to say that the UK is better protected against further international headwinds, following measures taken by the Treasury at recent fiscal events to bolster the UK’s public finances.
Spring Statement
Reeves is delivering today’s Spring Statement while markets continue to reel from the impacts of the US-Israeli conflict with Iran.
As of 11am GMT, the UK’s FTSE 100 index opened 1.4% down this morning, with brent crude prices up by 3.2% to US$80 per barrel and the price of gas surging by 30%, the BBC reports.
The chancellor’s allies have told the FT that she will claim the UK has a “stability dividend”, built over previous fiscal events, that will help the country withstand any shock from the war in Iran.
“This government has the right economic plan for our country in a world that has become yet more uncertain,” Reeves will say.
“Because of the decisions we have already taken, we have a stronger and more secure economy. Inflation and interest rates are falling and in every part of Britain, working people are better off.”
Until the conflict began, there had been more positive reports that the Treasury’s fiscal headroom was going in the right direction, and that today’s statement would be a “boring” event used to assure businesses of a more stable economic environment going forwards.
A rise in gas prices could be especially disruptive though, with the UK relying on it for heating and electricity. The Guardian also reports that grocery inflation saw a surprise jump in February after four months of falls, leading to fears that international headwinds could precipitate another ‘cost of living’ crisis for consumers.
We will have further analysis of the Spring Statement in tomorrow’s Global Trade Today newsletter. Sign up for free here.
Iran crisis hits UK-US relationship
The conflict in the Middle East enters its fourth day today, with the UK allowing the US to use its bases in the region for a “specific and limited defensive purpose”.
US President Donald Trump has rebuked prime minister Sir Keir Starmer over the UK’s reluctance to further support the US-Israeli campaign, saying “he has not been helpful”.
“It’s a different world, actually. It’s just a much different kind of relationship that we’ve had with your country before. It’s very sad to see that the relationship is obviously not what it was.”
Starmer has said that the UK would only get further involved if there was a “lawful basis, and a viable thought-through plan”.
The situation reflects a shift in the Starmer-Trump relationship, with the prime minister’s hitherto “pragmatic approach” to the ‘special relationship’ yielding the UK preferable trading conditions with the US compared to other partners.
Chartered Institute members can read more about how the Middle East crisis is affecting global shipping and energy prices in today’s exclusive State of Freight feature.
If you are not yet a member, sign up today to access exclusive insights from our team of trade policy and customs experts.
UK-US tension over medicines
In another signing of strained UK-US relations, Trump’s ambassador to the UK has summoned Jonathan Benger, the chief executive of the National Institute for Health and Care Excellence (NICE), to criticise the UK’s “anti-growth policies” and to decry its resistance to higher drug prices.
A US Embassy spokesman told the FT: “Although the United Kingdom rightly takes pride in its life sciences industry, excessive regulatory barriers and anti-growth policies now threaten its viability.”
Where does the Iran crisis leave China?
The Iran crisis is set to have ripple effects in relation to various geopolitical relationships, including the predominant US-China rivalry, with Trump set to meet counterpart Xi Jinping in Beijing in the coming weeks. Reuters reports today that senior US and Chinese trade negotiators are expected to convene in mid-March ahead of an expected leaders’ summit.
Chinese commitments to buy more Boeing aircraft and US soybeans, and the future of Trump’s tariffs – particularly after the recent Supreme Court ruling on their illegality – are expected to be the key talking points from a trade perspective. However, the US’ recent military action in both Venezuela and Iran – which China has spoken out against – will also be key factors in the talks, with Beijing stepping up military exercises around Taiwan.
The Iran conflict poses risks for China. Analysis by Erica Downs, a senior research scholar at the Center on Global Energy Policy at Columbia University, notes that over a fifth of China’s 2025 oil imports came from US-sanctioned Iran, Venezuela and Russia.
However, the conflict could also provide Beijing with leverage over the US due to the latter’s dependence on gallium for weapons that contain semiconductors and radars, “a critical mineral whose supply chains China controls”, according to the Guardian.
There are also now heightened questions over US capacity to intervene should China launch a military campaign against Taiwan, with US military attention currently fixed on Venezuela and Iran, with negotiations also ongoing regarding the future of Ukraine.
In other trade news
· The director general of the CBI has told Politico that UK businesses are comfortable with the “evolution, not revolution” approach to the ongoing UK-EU reset
· The government has confirmed that Leonardo UK was selected for a £1bn contract to produce new medium helicopters, securing 3,300 British jobs
· The Department for Business and Trade (DBT) has issued a ‘Notice to Importers’ explaining that certain goods with a potential dual use as “torture equipment” are subject to import bans or licensing requirements
Yesterday in trade
· The initial repercussions of the Iran conflict included major shippers ceasing transit through the Strait of Hormuz and Suez Canal
· India and Canada announced a series of new deals following a ‘reset’ leaders’ meeting in New Delhi
· Our customs practice director Anna Doherty gave advice on how businesses can avoid duty overpayments and protect margins in a changing customs landscape
You can read yesterday’s trade news here.
