Chancellor Rachel Reeves chose a deeply unfortunate moment to deliver her Spring Statement to the House of Commons on March 3, with the FTSE 100 falling 2.6% during her speech and extending its losses to more than 3% by the closing bell.
The sell-off had nothing to do with anything she said. The market was already in retreat, driven by Iran war fears, surging oil prices and the kind of inflationary anxiety that makes any forward guidance about monetary policy feel instantly obsolete.
“The Chancellor was trying to project a ‘keep calm and carry on’ message,” said Susannah Streeter of Wealth Club, “but market turmoil continued during her speech, with UK borrowing costs having shot up and London’s FTSE 100 deep in the red.”
The Office for Budget Responsibility downgraded UK growth forecasts to 1.1% for 2026, down from the 1.4% projected in November — a meaningful revision that reflects the cumulative drag of elevated inflation, higher borrowing costs and weaker consumer demand.
Unemployment is now projected to peak at 5.3% this year, above both the 2025 figure and the autumn forecast of 4.9%, before gradually declining toward 4.1% by the end of the decade.
Reeves pointed to base rate cuts totalling six since Labour came to power as evidence of progress, arguing the typical new fixed-rate mortgage had fallen by £1,300 annually as a result.
The OBR had its own honest admission: “Conflict in the Middle East, which escalated as we were finalising this document, could have very significant impacts on the global and UK economies.”
Government borrowing is forecast to fall by nearly £18 billion compared to the autumn projections, and fiscal headroom by the end of the decade is projected at £23.6 billion — numbers that would feel reassuring in a different geopolitical context.
Two-year fixed mortgage rates have since jumped from 4.83% to 5.32% in March alone, as Iran war volatility flows directly into the cost of borrowing for every Londoner trying to buy or refinance a home.
The Spring Statement was supposed to be a quiet mid-year checkup. The market turned it into something rather more dramatic.