Is 'stability' enough? Economic adviser at Lancashire-based MHA assesses UK economic performance following Spring Statement

This was the view of Professor Joe Nellis, economic adviser at accountancy and advisory firm MHA, which has offices in Preston and Lancaster, as he assessed the UK’s finances following Chancellor Rachel Reeves’s fiscal update in today’s Spring Statement (March 3).

Against a backdrop of ‘cautious’ rather than ‘transformative’ economic growth, in which the economy has avoided recession but many of the Chancellor’s targets remain unmet, Joe gave his assessment of the economy’s performance in four key areas: economic growth, public finances, inflation, and unemployment, rating each from A to D.

On economic growth, he gave a C rating, stating that despite stability and signs of life, growth remained sluggish by historical standards.

He said: “The government has prioritised fiscal discipline and credibility, but business investment has yet to recover decisively and productivity gains are limited. Without stronger investment, skills development and productivity reform, economic growth risks remaining steady but uninspiring.”

Joe judged both public finances and inflation a B, pointing to recent improvements.

He said: “Borrowing has remained high but is broadly under control, helped by stronger tax receipts - as a result of an increased tax burden - and a cooling inflation environment in recent months. Debt levels are still elevated, limiting fiscal room for manoeuvre.

“This approach has reassured financial markets, leading to a decrease in gilt yields since autumn that has soothed the impact of high debt-interest costs. There’s a long way to go before the economy’s debt-to-GDP ratio moves in the right direction, but a turning point may just have been reached.”

He added there had been clear easing in inflationary pressure due to low energy costs and easing supply constraints.

“However, progress has been uneven. Core inflation has proved stubborn, services prices remain elevated, and cost pressures continue to weigh on key sectors,” Joe said.

“Inflation is set to continue moving towards the Bank of England’s 2 per cent target - it could be back on target as soon as the summer. That is, of course, dependent on international events and any impact on global energy prices.”

However, Joe highlighted the government’s ‘disappointing’ record on unemployment, grading this area with a D and pointing to the fact unemployment is currently 1.1% higher than when the government took office.

He said: “Hiring has slowed, vacancies have fallen, and youth unemployment has increased, raising concerns about school-to-work transitions and long-term skills scarring.

“There is a danger that our future workforce is irrevocably damaged as young people experience prolonged spells out of work. While some of this is down to over hiring as we came out of the pandemic and potentially the early impact of AI, much of this is in the hands of the state.

“The key test for the government is whether it can prevent short-term labour market softness - particularly among younger workers - from becoming a long-term drag on productivity and growth.”