Key Takeaways

• The Big Date: The Chancellor has commissioned the Office for Budget Responsibility (OBR) to publish the Spring Forecast on Tuesday, 3rd March 2026.
• A “Calmer” Statement: Unlike an Autumn Budget, this is an interim update. The government has committed to “one major fiscal event a year,” meaning significant tax changes are unlikely—unless the economic data has shifted dramatically.
• Growth & Inflation: The UK economy is forecast to grow by approximately 1.2% in 2026, with inflation expected to return to the 2% target by the summer.
• Interest Rate Outlook: Markets are pricing in a “lower and slower” approach. The Bank Rate (currently 3.75%) is expected to settle around 3.25% to 3.5% by late 2026.
• Local Focus: For Worcestershire, the “frozen” tax thresholds remain the biggest factor, with more residents being pulled into higher tax brackets despite the absence of new rate hikes.

1. The Chancellor’s “One Event” Rule

The government has moved to a system of one major fiscal event per year (the Autumn Budget). This means the March 3rd Spring Forecast is an Economic and Fiscal Outlook rather than a policy-heavy Budget.

Why this matters for you:

• Predictability: Businesses in Worcester, from the industrial units at Blackpole to the shops in Crowngate, can plan with more certainty. No news is often good news for business investment.
• The “Significant Change” Clause: The Chancellor has stated she will not normally respond with fiscal policy unless there is a significant change to the economic outlook. We will be watching for any unexpected revisions to borrowing costs or growth that could force her hand.

2. Inflation & Interest Rates: The Long Descent

The headline story for 2026 is the cooling of the inflation “fever.” Current forecasts suggest inflation will hit the Bank of England’s 2% target by the summer of 2026.

The Impact on Borrowing:

The Bank Rate was reduced to 3.75% in December 2025. The March forecast will provide the OBR’s view on where rates will “neutralise.”

• Mortgages: If you are on a tracker or looking to remortgage, the forecast will likely confirm that while the “spike” is over, we are not returning to the 1% rates of the past. A “neutral” rate of 3.25% or 3.5% is the new baseline.
• Business Loans: Lower base rates improve cash flow for Worcester’s SMEs, but lenders remain cautious. Demonstration of profitability is now more important than ever for local firms seeking finance.

3. The “Stealth” Reality: Frozen Thresholds

While the March 3rd statement is unlikely to announce new tax rises, it will confirm the ongoing impact of frozen thresholds.

• Personal Allowance: Frozen at £12,570
• Higher Rate Threshold: Frozen at £50,270.
• The Result: As Worcester employers increase wages to match the 2026 National Minimum Wage hike (rising to £12.71), thousands of local workers will find a larger percentage of their “raise” going to the taxman. This is “fiscal drag” in action.

4. Local Spotlight: The Worcestershire Funding Gap

The Spring Forecast also provides the macro-economic backdrop for local government. Worcestershire County Council has noted a significant funding gap of over £70m for the 2026/27 period.

What this means for residents:

• Council Tax: Expect a 4.99% increase in the local portion of your bill as the council struggles with the rising costs of adult social care and children’s services.
• Public Services: The OBR’s forecast on public spending will dictate how much “Exceptional Financial Support” might be available for councils like ours that are facing intense budgetary pressure.

5. Summary: A Year of “Lower and Slower”

The 2026 Spring Forecast points toward a year of consolidation. Growth is modest (1.2%), inflation is settling, and the labour market is “loosening” (unemployment is expected to hover around 5%).

For the individual, success in 2026 will come from efficiency. Since the government isn’t providing tax breaks, you must find efficiency through:

1. Utilising ISAs and Pensions to combat frozen thresholds.
2. Reviewing Mortgage Deals early to catch the downward trend in rates.
3. Tightening Business Margins to account for higher employment costs.