While British Chancellor of the Exchequer Rachel Reeves emphasized her government's commitment to economic stability, the broader outlook remains uncertain. Analysts say the British economy continues to face pressures from international markets, energy price fluctuations, and weak productivity.

by Xinhua writers Zhao Xiaona, Larry Neild

LONDON, March 28 (Xinhua) -- British Chancellor of the Exchequer Rachel Reeves on Wednesday said Britain's new fiscal plan aims to safeguard economic stability and boost long-term growth.

However, with U.S. President Donald Trump threatening a new wave of tariffs, many still wonder if such a plan will work when a fresh global trade conflict could derail Britain's already fragile recovery.

BUILT ON TIGHT MARGINS

The Office for Budget Responsibility (OBR), Britain's public finance watchdog, has cut Britain's growth forecast for 2025 from 2 percent to 1 percent, citing stagnating productivity, global uncertainty, and tighter financial conditions.

Delivering her first Spring Statement since taking office, Reeves admitted: "I am not satisfied with these numbers," emphasizing the need for "hard yards" and long-term reform to fix Britain's economic foundations.

She announced 14 billion pounds (about 18 billion U.S. dollars) in spending cuts and welfare reforms to restore the government's previously projected surplus of 9.9 billion pounds (about 12.82 billion dollars) by 2029-2030.

However, economists argue that those measures may be overstated, stressing that the margin is razor-thin.

Richard Hughes, chair of the OBR, said the chancellor has "very little room for manoeuvre" compared to her predecessors, adding that her current buffer is only about one-third the size of those typically maintained in the past.

He warned that this leaves her vulnerable to even moderate shocks in growth, interest rates or trade.

LOOMING EXTERNAL THREAT

Trump is expected to announce a new set of reciprocal tariffs on April 2, potentially affecting British exports. While the British government is actively seeking exemptions, the risk remains acute.

"The future direction for trade policy is highly uncertain," the OBR said. According to its latest scenario modeling, a 20 percentage point rise in tariffs between the United States and its trading partners could reduce Britain's GDP by as much as 1 percent at its peak.

Hughes warned that such a shock would be enough to "wipe out the headroom the chancellor has just restored."

Steve Nolan, senior economics lecturer at Liverpool John Moores University, told Xinhua that the chancellor's position is "very exposed to global market vagaries."

He pointed out that Reeves began the year with just 9.9 billion pounds of headroom and had already breached one of her own fiscal rules before the latest cuts brought her back into compliance.

"None of the pressure has gone away," Nolan warned. "Leaving yourself with so little room means you're vulnerable to turmoil."

Iain Begg, an economist at the London School of Economics and Political Science, said that Reeves' approach relies heavily on backloading gains into future years based on assumptions that economic growth will eventually pick up.

"To believe that there will be no further changes between now and 2029 is stretching credulity," he added.

UNCERTAIN OUTLOOK

While Reeves emphasized her government's commitment to economic stability, the broader outlook remains uncertain. Analysts say the British economy continues to face pressures from international markets, energy price fluctuations, and weak productivity.

The OBR estimates the probability of Reeves hitting her fiscal mandate at just 54 percent, which is believed to largely hinge on avoiding Trump's trade tariffs and hoping domestic reforms pay off.

"There's a cost, both economic and political, to that uncertainty," said Paul Johnson, director of the London-based Institute for Fiscal Studies. "The government will suffer the political cost. We will suffer the economic cost," he added.

As the British government prepares for its Spending Review in June and the full budget in the autumn, many observers believe that external global turbulence could force Reeves to review her economic roadmap.