UK slashes growth forecast, cuts public spending
LONDON
The U.K. government on March 26 halved its 2025 growth forecast as it made billions of pounds of spendings cuts to shore up the public purse in the face of economic headwinds.
The Spring Statement spending update came as the Labour government, elected in July after a landslide election win, faces sluggish economic growth and rising borrowing costs.
Britain's economy is expected to grow by just one percent this year, revised down from an estimate of two percent made in late October when Labour presented its inaugural budget.
However, the Office for Budget Responsibility, the U.K.'s spending watchdog, upgraded the country's growth forecast for the three following years.
"Our task is to secure Britain's future in a world that is changing before our eyes," finance minister Rachel Reeves told parliament in the highly-anticipated update.
Concerns over U.S. tariffs and the war in Ukraine have added to the U.K.'s economic woes, chipping away the government's fiscal cushion.
Prime Minister Keir Starmer recently pledged to hike spending on defense, with the government Wednesday confirming a £2.2-billion ($2.8 billion) boost next year.
To avoid deepening the deficit, Reeves has cut disability welfare payments and government departmental budgets, blaming a period of heightened uncertainty in global markets.
Ahead of March 26's update, it also unveiled that it would slash the cost of running the civil service by 15 percent over the next five years, targeting annual savings of around £2 billion.
While Labour has highlighted increased funding for housing, the struggling National Health Service and reforms to workers' rights, it is the spending cuts that have taken the spotlight.
In a glimmer of good news, official data showed on March 26 that Britain's annual inflation rate eased to 2.8 percent in February, down from 3.0 percent in January.
