Rachel Reeves says she “would prefer not to” raise taxes to fund increased defence spending, having already raised the tax burden “significantly.” The Chancellor’s comments came after former Defence Secretary Lord Robertson of Port Ellen accused the Government of “corrosive complacency” on military spending. Noting that she is “proud to be the Chancellor that provided the biggest uplift of defence spending since the end of the Cold War,” Ms Reeves said: “Obviously, we’re working through a range of options, but my two budgets have both increased taxes substantially, and I would prefer not to have to do that again.” Highlighting that the conflict in the Middle East had increased the cost of Government borrowing, she said: “We already spend one in every £10 of what Government spends on servicing the debt,” adding that “if we increase that debt further, we’d only be increasing how much we’re spending.”

First Minister John Swinney has pledged not to raise taxes in the next parliament as part of the SNP’s pledges ahead of the Scottish election. The party’s manifesto pledges not to increase the rates of income tax, or the amount of bands, with a promise to simplify the tax regime. Saying that the SNP has “set out some fair commitments on income tax,” Mr Swinney added: “We have a fair and progressive system, the most progressive in the United Kingdom, and we’ll keep it that way.” However, he noted a need to be “mindful of the turbulent conditions in which we’re operating and … the effects of inflation and other factors on taxpayers.”

The UK economy saw growth of 0.5% in February, according to the Office for National Statistics (ONS), with this the biggest monthly rise in more than two years. The ONS said the services sector, which accounts for more than three-quarters of the economy, grew by 0.5%. Production output also grew by 0.5%, while construction rose by 1%. The ONS also revised its estimate for January up to 0.1%, having previously said there had been no growth in the opening month of the year. In the three months to February, GDP grew by 0.5% – up from 0.3% in the three months to January. With economists having forecast that the economy would grow by just 0.1% in February, Deutsche Bank’s Sanjay Raja said the actual figure had “smashed expectations.” However, analysts expect the conflict in the Middle East to have a negative impact on the economy, with Ruth Gregory from Capital Economics saying the “bumper” growth in February was “probably already extinguished” by the war in Iran. Martin Beck, an economist at WPI Strategy, said the latest figures were the “calm before the storm.”

The Organisation for Economic Co-operation and Development (OECD) says UK unemployment has risen at a faster pace than any country in the G7, having increased by 0.8% to 5.2% between Q4 2024 and the closing quarter of 2025. This equates to around 300,000 people leaving employment over the 12-month period. The OECD report also found that youth unemployment in the UK hit 16.1% in Q4 2025, having risen by 1%, year-on-year.

Suren Thiru, chief economist at the ICAEW, has warned that a “severe spell of stagflation looks locked in,” with the surging energy costs stemming from the conflict in the Middle East “expected to trigger sizeable falls in investment and consumer spending.” Considering the impact of the economic uncertainty, Yael Selfin, chief economist at KPMG, said British firms are being “hit by a double whammy of higher energy and borrowing costs,” which could see them “delaying or scaling back investment plans, as well as passing on some of their costs to consumers.”

Barclays has been identified as the bank most likely to suffer from recent downgrades to the UK economy, primarily due to its optimistic forecasts. The bank predicts economic growth of 1.1% for 2026, with this higher than the independent average of 1% and the 0.7% forecast from Lloyds. The independent body average includes forecasts from the International Monetary Fund, Treasury, National Institute of Economic and Social Research, Bloomberg, and Bank of England. Benjamin Toms, equity analyst at RBC, said macroeconomic downgrades could hurt Barclays, with it noted that economic growth predictions are used to calculate expected credit losses.

Research by Corpay reveals that 83% of CFOs believe their organisations rely too heavily on manual spend processes. Despite recognising the importance of automation and card-led payments, many companies still use a mix of manual and automated methods. The poll saw 86% of CFOs say their finance teams spend over six hours per person, per week on expense, invoice and supplier payment administration, with more than a quarter saying this takes between 11 and 15 hours. Meanwhile, 91% are concerned about competitors being quicker to adopt automated solutions. Piero Macari of Corpay said: “The message from UK CFOs is clear. Payment automation is increasingly being viewed as a strategic priority.”

Maria Ward-Brennan in City AM says the Big Four are grappling with significant challenges as AI reshapes the consultancy landscape. She says that the industry is facing “a storm of problems,” with over-recruitment during the pandemic, low staff turnover, and declining fees “prompting firms to rush to protect profitability.” James Ransome, a partner at Patrick Morgan, says: “As AI compresses both the cost and time of delivery, the classic model starts to break down.” Ms Ward-Brennan, who notes that PwC is looking to standardise its consultancy services across its global business, suggests that firms must consider deeper operational changes to remain competitive as the sector evolves.

Arman Tahmassebi, CEO of savings platform Flagstone, says UK households are increasingly hoarding cash due to fears of sudden tax changes on assets like capital gains and inheritance. He notes that clients are liquidating assets to maintain liquidity amid fiscal uncertainty. It is suggested that this undermines the Treasury’s efforts to encourage retail investing, as Chancellor Rachel Reeves prepares a campaign to promote riskier assets.