4 Spring Forecast | 3 March 2026 ● Unemployment for October to December 2025 was 5.2%, up from 4.4% for the corresponding period a year ago and above pre-coronavirus pandemic rates. The hardest hit were those aged 16 to 24, where the unemployment rate was 16.1%, the highest for over a decade. ● Average weekly earnings annual growth (with and without bonuses) was 4.2%, down from 5.9% for October to December 2024. However, the latest figure is distorted by the bunching of public sector pay settlements – the private sector earnings growth (with and without bonuses) was 3.5%. ● Annual CPI inflation was 3.0% in January 2026, unchanged from a year ago. The Bank of England, along with many independent forecasters, anticipate that inflation will be close to the Bank’s 2.0% by April. ● The volume of retail sales rose by 0.1% in the three months to January 2026, compared with the previous three months. However, January alone saw a 1.8% rise with the ONS noting there was “a good start to the year for nonfood stores”. This came on top of a 0.4% rise in December and a 0.4% November drop – probably attributable to that late Budget. Mixed economic data is less of a problem for the government’s finances than it would have been a year ago, thanks to the Chancellor’s decision in November 2025 to build an extra £11.8 billion into her fiscal headroom – the amount by which the government’s revenues are projected to exceed its day-to-day spending in 2029/30.
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