How will the UK government balance the books amid growing global instability? The ICE analyses Chancellor Rachel Reeves’ latest statement.

Rachel Reeves’ Spring Statement this week provided a little for infrastructure, a bit more for defence, and a sobering reminder of the uncertainty this government is facing in the geopolitical and trade environment.
The Office for Budget Responsibility (OBR) has forecast that growth in 2025 will be lower than previously expected and then rebound over the next four years.
But the tariffs imposed by US President Donald Trump just hours after Reeves fronted in the House of Commons may throw a further spanner in the works – and not just for the car industry.
Reeves has recommitted the government to meeting its fiscal rules (the self-appointed restrictions to reduce debt and avoid over-spending) despite increasing global political instability.
To deliver on the government’s growth mission despite these constraints, she’s betting the house on the impact of the Planning and Infrastructure Bill and other supply side reforms.
The fiscal outlook
The OBR has downgraded the growth outlook for this year to 1%, while the Bank of England has it at 0.7%. Longer term, growth is expected to be higher than what was forecast in the October Budget.
Net debt is expected to reach 82.9% of GDP in 2025-26 and 83.5% in 2026-27, before falling to 82.7% in 2029-30. Cuts to day-to-day spending – largely from the welfare budget – have been made to offset the rising cost of this borrowing.
This provides the chancellor headroom of £15.1 billion in the final year of the forecast. However, this means moving from a deficit of £36.1billion in 2025-26 to a surplus of £9.9 billion by 2029-30 - a big ask for any government.
The OBR has warned that the available headroom gives the government a very small margin to work with. Any further shocks could see this wiped out very quickly.
What does this mean for infrastructure?
Despite these constraints, capital spending is not being reduced. In fact, it’s being increased by an annual average of £2 billion compared to the October Budget (£13 billion in total).
The focus of this spending will be on infrastructure, housing and defence and comes in addition to the £100 billion increase announced in the Autumn Budget.
This includes £625 million for construction skills and £2 billion for social and affordable housing in 2026/27.
Transport
The Spring Statement documents revealed that the third Road Investment Strategy won’t be coming until next year.
Instead, National Highways has been granted £4.8 billion in interim funding for 2025/26.
The government is waiting for the release of its spending review and 10-year infrastructure strategy in June before committing to longer-term plans.
Planning reform
The OBR has also delivered a verdict on initial changes to the National Planning Policy Framework, which are expected to add £15.1billion to the economy in the next 10 years. This is the biggest growth impact the OBR has ever registered for a zero-cost policy.
The OBR expects these reforms to help build over 170,000 homes, towards a forecast of 1.3 million across the UK within the next five years (contributing to the government’s goal of 1.5 million more homes in England over the same period).
However, it’s yet to determine what impact the reforms in the Planning and Infrastructure Bill, 10-year infrastructure strategy, and industrial strategy will have.
The chancellor can’t afford for these initiatives to not be a success.
Dealing with the realities of the geopolitical environment
The government has allocated £2.2 billion for the Ministry of Defence in the next financial year and signalled its intention to make the UK a ‘defence industrial super power’.
Delivering on this ambition alongside required infrastructure investment will demand well-thought-out planning across the infrastructure and defence supply chains.
Demand for highly skilled engineers and other infrastructure and defence professionals will rub up against an already constrained infrastructure supply chain and skills shortages.
It’s still a waiting game
The Spring Statement demonstrates the pressure the government is under to make sure its reform agenda delivers on its ambition for growth.
There’s some positive news, especially when it comes to the impact of early changes to the planning system. But there’s plenty of geopolitical and trade uncertainty casting a long shadow over projected longer term growth numbers.
The economic outlook is relatively bleak, at least in the short term, but infrastructure investment and system reform are key levers the government is looking to pull to get things back on track.
For now, though, it’s a waiting game until the spending review and infrastructure strategy announcements in June.
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