Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

Economists warn Chancellor may face emergency spring budget as recession risks loom

by December 17, 2024
December 17, 2024
Economists warn Chancellor may face emergency spring budget as recession risks loom

Rachel Reeves could be forced into announcing emergency tax rises as early as this spring if the UK’s economic outlook continues to deteriorate, leading economists have warned.

The Chancellor’s recently introduced tax and spending rules, known as the “stability rule,” leave her little room to manoeuvre if public finances falter, potentially compelling her to raise taxes or cut spending by March.

Under the stability rule, Ms Reeves can only borrow to invest, rather than fund the day-to-day running of government. Any significant decline in growth and its resulting impact on revenues would therefore demand immediate corrective action to keep the books balanced. Ben Zaranko, an economist at the Institute for Fiscal Studies, said that should current projections of a small budget surplus flip into a deficit, the Chancellor may have to tighten the fiscal screws further at the spring statement.

The warning comes as new data suggest the UK economy is grinding to a halt. Businesses are shedding jobs at the fastest pace since the global financial crisis—excluding the pandemic—as confidence ebbs following the Chancellor’s record £40bn tax raid. S&P Global’s latest flash composite purchasing managers’ index edged down to 50.5 in December, barely above the critical 50-point mark that separates growth from contraction.

Chris Williamson, chief business economist at S&P Global Market Intelligence, described the economy as “stagnating” amid “downbeat rhetoric and policies” from the Labour government. He noted that a sharp pullback in hiring is partly the result of rising employer National Insurance contributions, which were announced in October’s budget. While private sector activity clings to positive territory, the deterioration in sentiment and increased job cuts herald a bleaker economic horizon in 2025.

Ms Reeves, who has already committed to not holding another full Budget before the spending review, has hinted that any emergency adjustments would lean towards spending measures, rather than fresh tax hikes. Nevertheless, Treasury sources have not ruled out tax rises, insisting the Chancellor “will plan for all scenarios” and that meeting fiscal targets is “non-negotiable.”

Observers point out that Ms Reeves’s buffer against budget fluctuations will not kick in until 2026. Until then, the stability rule requires her to ensure day-to-day expenditures are covered by current revenues, leaving her with limited flexibility if the UK’s already fragile economy worsens.

The Chancellor’s position is further complicated by rising inflationary pressures. Businesses surveyed by S&P Global reported passing higher costs, including those from rising National Insurance contributions, onto consumers through increased prices—a move that could curtail the Bank of England’s scope to cut interest rates and ease economic pressures. Analysts at Pantheon Macroeconomics warn that the Bank may need to maintain a tighter stance for longer, making the Chancellor’s balancing act even more challenging.

With economists at Capital Economics and the IFS expressing concern that the UK may already be flirting with recession—commonly defined as two consecutive quarters of negative growth—the spring statement is shaping up to be a critical juncture. Whether driven by unforeseen shocks or protracted stagnation, Ms Reeves may find herself forced to deliver another round of fiscal pain before the end of the financial year.

Read more:
Economists warn Chancellor may face emergency spring budget as recession risks loom

0
FacebookTwitterGoogle +Pinterest
previous post
Guy Hands-linked property firm sells 36,000 military homes back to mod for £6bn
next post
Morning Glory: Trump’s approval ratings have never been higher

You may also like

Adam Clarke on Business Success Factors

August 17, 2022

High cost of borrowing puts firms on their...

October 17, 2022

Can Developers Use AI to Advance Blockchain?

November 13, 2023

British Business Bank Start Up Loans programme unveils...

May 24, 2023

Amazon pledges $4bn to Anthropic in race for...

September 25, 2023

FCA chief warns severe consequences for lying about...

December 13, 2023

US threatens to double tax rates on UK...

April 6, 2025

Brexiteer Tories waver on support for Rishi Sunak’s...

March 22, 2023

A Conversation with Seton Noble on Ambition, Impact,...

September 17, 2024

Why Does Communication in Health and Social Care...

March 11, 2025

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Padel club boom sees 3,200 venues built in 2024 as global popularity accelerates

      June 27, 2025
    • Sweet or taxable? M&S strawberry sandwich sparks new VAT debate

      June 27, 2025
    • Starmer thanks business for footing tax bill

      June 27, 2025
    • UK SMEs must strengthen cybersecurity as geopolitical threats escalate, warns Espria

      June 27, 2025
    • Jeremy Hunt ‘made a mistake’ targeting non-doms, says shadow business secretary

      June 27, 2025
    • Small firms raise alarm over Companies House rule change forcing profit disclosure

      June 27, 2025

    Categories

    • Business (8,326)
    • Investing (2,074)
    • Politics (15,824)
    • Stocks (3,172)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved