UK Braces for Spending Cuts as Growth Slows and Borrowing Rises

The UK government is set to announce fresh spending cuts in Wednesday’s Spring Statement as Chancellor Rachel Reeves grapples with rising borrowing costs, weakening growth, and a shrinking fiscal buffer. 

Since the Autumn Budget, bond yields have risen by 20–40 basis points, driving up interest payments and undermining the £10 billion headroom the Treasury had previously forecast for FY29/30. Economists now expect Reeves to introduce around £10 billion in delayed spending cuts to keep within her fiscal rules—cuts likely to target welfare budgets and Civil Service staffing, with some savings only materialising after 2027.

The UK will halve its 2025 GDP growth forecast from 2% to just 1%, exacerbating tax revenue shortfalls and leaving the UK’s fiscal position exposed. 

At the same time, inflationary pressure is back on the radar, with the Bank of England warning of a temporary uptick, while US trade tensions under a possible Trump presidency loom are still a global risk. 

What Does This Mean for Me?

Reeves, who has pledged not to raise taxes further for now, is also expected to allocate £2.2 billion in additional defence funding, nudging spending toward 2.5% of GDP. Analysts say the Chancellor’s challenge lies in balancing fiscal credibility with political pressure for economic growth and public service improvements.

With interest rates still elevated and growth forecasts under pressure, The UK’s room to manoeuvre has narrowed—making this Spring Statement a test of both discipline and vision.