Reactive (response to change)

Spring Statement 2026: what it means for your business

The Chancellor's Spring Statement on 23 February 2026 contained no major tax or spending changes, but the OBR's downgraded growth forecast and rising unemployment predictions affect business planning. Business rates relief for pubs and music venues was confirmed, and farmland inheritance tax plans were further softened.

Change event: Spring Statement 2026: OBR downgrades growth forecast and confirms fiscal headroom Effective 23 February 2026

Overview

Chancellor Rachel Reeves delivered her Spring Statement to MPs on 23 February 2026. Unlike a full Budget, this was a low-key update with no major new tax or spending measures. However, the Office for Budget Responsibility (OBR) published revised economic forecasts that affect business planning across all sectors.

The key message for businesses: the economic outlook has weakened since November's Budget, with slower growth and higher unemployment expected in 2026. But fiscal headroom has increased, and two previously announced policies — business rates relief and farmland inheritance tax — were softened in favour of businesses.

GDP growth forecast 2026
1.1% (down from 1.4% at November Budget)
GDP growth forecast 2027
1.6% (up from 1.5%)
GDP growth forecast 2028
1.6% (up from 1.5%)
Unemployment forecast 2026
5.3% (rising before falling to 4.1% by 2030)
Inflation forecast 2026
2.3% average (reaching 2% target in 2027)
Fiscal headroom (day-to-day spending rule)
£23.6bn (up from £21.7bn)
Fiscal headroom (debt rule)
£27.1bn

Economic growth downgraded

The OBR now predicts the UK economy will grow by 1.1% in 2026, down from the 1.4% forecast at November's Budget. Growth is expected to pick up to 1.6% in both 2027 and 2028, marginally higher than previously predicted.

For businesses, slower growth in 2026 means potentially weaker consumer demand and tighter conditions for expansion. If you are planning investment or recruitment decisions, factor in a more cautious outlook for the year ahead. The modest improvement in 2027–2028 forecasts offers some medium-term reassurance.

Unemployment rising

UK unemployment is forecast to increase to 5.3% in 2026 before falling gradually to 4.1% by 2030. This reverses the tight labour market conditions many employers have experienced in recent years.

For employers, a looser labour market may ease recruitment difficulties but could also reduce consumer spending power. Businesses relying on overseas workers should note that net migration is predicted to be 60,000 a year lower than previously estimated, fluctuating between 200,000 and 300,000 per year to the end of the decade.

Business rates relief for pubs and music venues

The government confirmed its January announcement to soften business rates for pubs and music venues in England. The OBR estimates this will cost the Treasury an extra £100 million per year.

If you run a pub, bar, or music venue in England, you may benefit from reduced business rates. Check with your local authority or the Valuation Office Agency to confirm your eligibility. Note that business rates are devolved — Scotland, Wales, and Northern Ireland set their own reliefs.

Farmland inheritance tax further watered down

The government's plans to tax inherited farmland — first announced in the November 2024 Budget and partially softened in December 2025 — have been further watered down. The OBR says this latest change means the policy will raise £100 million per year less than originally projected.

If you own or are planning to inherit agricultural land, the reduced impact provides some relief, though Agricultural Property Relief (APR) and Business Property Relief (BPR) changes still represent a significant shift from the previous unlimited exemption. Take professional advice on succession planning.

Housing and mortgage outlook

Average interest rates on existing mortgages are predicted to rise from 4.1% in 2026 to 4.5% by 2030 — lower than estimated at the Budget. UK housebuilding is forecast to fall from 260,000 per year in the early 2020s to 220,000 in 2026/27, before rising to 305,000 per year by 2030/31.

For businesses in construction and property, the short-term dip in housebuilding may affect order books, but the projected recovery to 305,000 homes per year by 2030/31 signals strong medium-term demand. Property-based businesses should also note the modestly lower mortgage rate trajectory compared to earlier forecasts.

No new tax measures

Crucially for business planning, the Spring Statement did not introduce any new taxes, tax rate changes, or spending measures. The OBR confirmed it will wait for the next Budget before assessing whether the Chancellor is on track to meet her fiscal rules.

This means the tax landscape remains as set at the November Budget. Businesses should continue planning on the basis of existing announced changes — including the April 2026 National Minimum Wage increases, employer National Insurance changes, and Making Tax Digital for Income Tax requirements.

❗ What you should do now

Although no new measures were announced, you should:

  • Review your business plan — factor in the downgraded 1.1% growth forecast and higher unemployment for 2026 when planning cashflow and investment.
  • Check business rates relief — if you run a pub or music venue in England, check whether you qualify for the newly confirmed relief.
  • Take succession advice — if you own farmland, review the latest inheritance tax position with your adviser.
  • Prepare for April changes — National Minimum Wage, employer NI, and other April 2026 changes still apply as previously announced.

ℹ️ Devolved nations

Business rates are devolved. The pubs and music venues relief announced in this Statement applies in England only. Scotland, Wales, and Northern Ireland set their own business rates policies and reliefs. Check with your devolved administration for equivalent provisions.