Consensus emerged after chancellor Rachel Reeves’ Spring Statement, delivered to parliament yesterday (3 March), that Reeves was wise to strip the address of any big policy announcements – with the economic foundations of the statement already out of date by the time of delivery, as military turmoil in the Middle East reshaped the financial context for future borrowing and spending.
The conflict has dramatically reduced shipping through the region, with transits through the Strait of Hormuz down 80%.
Elsewhere, MPs have found many aspects of the government’s EU reset lacking, in both strategic direction and transparency.
Need for ‘stability’
Reeves was keen to emphasise stability and continuity in government planning, saying that Labour would stick to its economic plan and her mission is “building growth and economic security in an uncertain world”.
Even as the US-Israeli campaign against Iran has escalated into a wider regional conflict, with increasing US pressure for UK military involvement, Reeves said that “stability is the single biggest precondition for economic growth”.
Referencing the crisis, she continued that stability was imperative in a world that in recent days has "become even more complicated, with turbulence seen beyond our borders”.
Amid the government’s aspirations to enhance trade and defence cooperation with the EU, Reeves also said that in two weeks’ time, she would “set out how the UK would go further in strengthening our global relationships, breaking down trade barriers and deepening alliances with our European partners for a more secure and connected economy.”
‘Vital importance’ of tackling barriers
The Chartered Institute of Export & International Trade’s director general Marco Forgione welcomed the chancellor’s comments on EU cooperation. Forgione drew attention to “the vital importance of breaking down trade barriers as part of ‘three major choices’ to determine the course of the future economy”.
However, he added that “more needs to be done to support businesses in exporting to diversify UK supply chains and build resilience and stability in an uncertain and unstable world.”
Addressing not only the ongoing crisis in the Middle East but wider geopolitical tensions and the shifting international trade landscape, he said the backdrop to the statement ultimately highlights that it’s “a difficult time to predict the future trajectory for the UK economy”.
As Reeves sought to reassure and project a measured perspective, the Office for Budget Responsibility (OBR) painted a gloomier picture, warning that the Middle East conflict “could have very significant impacts on the global and UK economies”.
Chartered Institute public affairs executive Will Poulain said that the statement was ultimately designed to “reassure businesses of the confidence investors have in the UK economy and to reassure businesses that the government is improving relations with other countries”.
Wider comment
This followed OBR figures indicating that UK GDP per person is 30% below where it would have been had the financial crisis not detrimentally impacted productivity.
Growth for the year ahead is expected to be slower than originally anticipated at 1.1%, confounding the IMF’s late 2025 look-ahead prediction of 1.3%.
Shadow chancellor Sir Mel Stride described the statement as “utter complacency”, saying there was “no growth strategy at all”.
In comments reviewed by BBC Verify, he also claimed the UK’ youth unemployment figures were the highest in Europe, indicating the country’s economic ill-health. While data from 2025 showed that UK youth unemployment figures (15.3%) were higher than the European average of 15.2%, 13 European countries had higher unemployment figures than the UK, according to the OECD.
Poulain said that “it was positive to see the government addressing the issue” of youth unemployment, after Reeves drew attention to the £820m youth guarantee set out last year. However, he also said that youth unemployment is expected to trend upwards this year, to the highest level seen since Labour entered government since 2024.
Borrowing pressure
Andrew Hunter, associate director and senior economist at credit ratings agency Moody’s noted that the Middle East conflict has already strained Reeves’ efforts to increase fiscal headroom as UK borrowing costs rose in response to rising energy costs.
“Although there is plenty of uncertainty over how the conflict will evolve and whether the jump in energy prices will be sustained, this provides yet another illustration of the UK economy’s vulnerability to external shocks and underscores that concerns over the public finances and the government’s ability to stick to its fiscal targets will persist.”
The Institute for Fiscal Studies praised Reeves’ decision to scale back the Spring Statement to a non-policymaking event, especially in the context of the Middle East crisis, which it said had “already upended some of the assumptions underpinning this forecast,” such as energy and interest rates.
Shipping strife
The Guardian reports that the Strait of Hormuz, a critical shipping route connecting East to West, has been effectively shut down by Iran.
Four tankers transiting through the region have been struck by drones and overall traffic through the strait has fallen 80% since Sunday, as reported yesterday by Global Trade Today. Typically, 20% of the world’s oil passes through the route.
Many tankers moving key energy products like oil and natural gas have stopped transiting through the region. Some are reportedly considering risky night transit and turning of their transponders, despite not being insured under those conditions.
A senior member of Iran’s revolutionary guard, Brig Gen Ebrahim Jabbari, warned on Monday that ships attempting to transit the strait would be “set ablaze”.
UK-EU reset criticism
The government’s reset of relations with Brussels is under scrutiny from the Foreign Affairs Committee, with committee chair Emily Thornberry telling Politico that the government is being “unnecessarily secretive” about discussions.
In a report released today (4 March), the committee writes that the reset “lacks clear strategic priorities”, which gives the appearance that “the EU has achieved more concrete progress towards their most pressing demands than the UK has”.
Although the UK has made progress towards building a stronger relationship with the EU, the committee writes that the “new partnership is a work in progress”. Timelines and milestones within negotiations on key issues including carbon pricing, electricity trading, agrifood and alignment on EU rules are “vague or non-existent”.
The report also comments on the UK’s “faltering” efforts to enter Brussels’ new defence scheme ‘Safe’ and the bloc’s consideration of policies harmful to UK economic interests – such as a planned rise in steel tariffs – as limitations of this new partnership.
Elsewhere in the headlines
- A failure of due process at the Port of Dover has raised the UK’s biosecurity risk, as meat and plant products are entering the UK from the EU without being checked for dangerous diseases, according to the Environment, Food and Rural Affairs Committee
- Spain’s prime minister Pedro Sánchez was outspoken in his criticism of US attacks on Iran and, following the country’s refusal to allow US access to its military bases, US President Donald Trump has threatened to end all trade with Spain
Yesterday in Trade
- UK-US tensions amid ongoing Middle East conflict
- China’s energy supplies hit by crisis although US defence demands could be a boon for critical mineral exports
- National Institute for Health and Care Excellence chief received a dressing down from the US ambassador to the UK over medicine pricing policy
You can read those stories and more here.
Picture credit: Rachel Reeves ©House of Commons
