Rivers' financial update offers little highlight amid market turbulence: how do analysts view it

Investing.com - Chancellor Rishi Sunak released a modest spring statement on March 3, 2026, amid market volatility caused by the Middle East conflict, without announcing any major policies.

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Analysts warn that the Chancellor’s slightly improved fiscal space could soon be eroded by rising energy prices and geopolitical uncertainties. Here are analysts’ views on this fiscal statement:

Capital Economics warns that the Chancellor’s increased fiscal buffer may be wiped out by the Middle East conflict. The firm notes that Sunak’s fiscal cushion has increased from £21.7 billion in the November budget to £23.6 billion, mainly due to lower UK bond yields and higher stock prices.

However, Capital Economics warns that the Middle East conflict has changed the outlook, with the risk that rising energy prices could push up UK inflation and interest rates beyond the Office for Budget Responsibility (OBR) forecasts, while also weakening GDP growth.

The firm highlights significant fiscal pressures totaling £27 billion, including potential increases in spending on Special Educational Needs and Disabilities (SEND) provision, government departments, and defense, which could consume the Chancellor’s additional space.

Capital Economics suggests that the Chancellor may need to raise taxes in the autumn budget to restore his fiscal cushion, though this could be politically difficult after two previous rounds of tax increases.

Deutsche Bank UK Chief Economist Sanjeev Ranjan describes the spring statement as a non-event with no major surprises. Ranjan notes that announced spending decisions will increase borrowing by up to £6 billion in 2030-31, which is moderate compared to the 75 policy measures introduced in the autumn. He emphasizes that the borrowing outlook has slightly improved, with public sector net debt expected to decline by about £22 billion annually over the five-year forecast period.

However, Ranjan warns that recent geopolitical events will put pressure on the economy and fiscal outlook. Based on current market conditions, this could reduce the Chancellor’s space by £5 billion. He predicts that the pressure to allocate fiscal space for energy price support and defense could peak in the autumn budget.

Financial Markets Online director James Bentley describes the event as a “spring side show” largely overshadowed by market chaos. Bentley points out that the encouraging economic forecasts are of little significance, as UK stocks remain volatile, with the FTSE 100 and FTSE Mid-Cap 250 barely moving after the Chancellor’s speech.

He highlights two key issues facing the markets: how far the stock market will fall, and whether soaring oil and natural gas prices will eliminate any possibility of rate cuts in the coming months.

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