The latest Spring Forecast suggests a strengthening UK economy, with Scotland in line for a significant funding uplift alongside easing inflation and rising living standards. The UK Government says its economic plan is delivering “the right results”, as borrowing falls, growth prospects improve and extra cash flows to devolved administrations.
Scotland is due to receive an additional £900 million in resource funding and £20 million in capital between 2026–27 and 2029–30, on top of record settlements at the 2025 Spending Review. This forms part of a wider £1.8 billion resource and £45 million capital package for the devolved governments, driven by spending decisions on areas such as education and special needs provision.
In addition, the UK Government has exceptionally applied the Barnett formula to £5.6 billion of write‑off grants for local authority SEND deficits in England, generating £1.1 billion in consequentials for Scotland, Wales and Northern Ireland in 2026–27. Ministers say this move ensures devolved settlements grow in real terms between 2024–25 and 2028–29, giving governments in Edinburgh, Cardiff and Belfast more scope to support services and investment.
Devolved advantage maintained
The Treasury emphasises that devolved governments, including Scotland, continue to receive more than 20% extra per head compared with equivalent UK government spending in England. In practice, this means that for every £1 the UK Government spends per person in devolved areas in England, Scotland and the other devolved nations can spend at least £1.20.
Officials also note that the devolved administrations remain funded above independently assessed relative‑need levels, with Wales and Northern Ireland both staying above benchmarks set at 115% and 124% of comparable UK spending. For Scotland, this sustained per‑capita premium is presented as underpinning long‑term investment in public services such as health, transport and education.
Across the UK, inflation is now expected to return to the 2% target in the second half of 2026, earlier than previously forecast, helping to ease the pressure of the cost of living. Government measures including a £150 cut to energy bills and a freeze on rail fares are forecast to reduce inflation by 0.4 percentage points in 2026–27.
Andy Steel, MD of QTS Group, said: “It was great to see the Chancellor commit to tackling the number of young people not in education, employment or training during her statement. The skills shortage presents a significant challenge across most industries, particularly in sectors like rail where the workforce is ageing.
“I welcome new reforms looking to tackle the issue and would like to see greater incentives for businesses – this is a crucial part of solving the problem and should not be overlooked.
“Businesses have a key role to play in delivering apprenticeships, traineeships and other clear routes into long-term careers for these young people. With the right support from the Government, we can work together to address the talent gap, encourage more young people into work and ensure vital sectors like rail are well-placed for the future.”
The Office for Budget Responsibility also expects GDP per head to grow faster over this Parliament than it projected at the Budget, with total growth of 5.6%. Britain is forecast to record faster economic growth than any other European G7 country in 2025, something ministers argue will support jobs and investment in regions and nations such as Scotland.
Borrowing down, headroom up
Borrowing is projected to be almost £18 billion lower than anticipated at the Autumn forecast, with this year’s figure set to be the lowest in six years. For the first time in 22 years, UK borrowing is also expected to fall below the G7 average, a benchmark the Treasury points to as evidence of greater fiscal stability.
Roan Lavery, CEO & co-founder of FreeAgent, said: “From working with over 200,000 business owners across the UK every day, we know small businesses are eager for additional practical support and guidance from the Government on the very real challenges they face. Now more than ever, small businesses need support, reassurance and stability in a world of shifting geopolitical tensions and economic uncertainty.
“No new policy announcements were made in the Spring Statement. However, small businesses will have lots of change to contend with from next month as many of the policy changes from the Autumn Budget come into force – including rising minimum wages, frozen personal tax thresholds and changing business rates.
“While the Chancellor didn’t specifically mention it, we take this as a clear signal that Making Tax Digital is coming into effect on April 6, representing the biggest change to the UK tax system in two decades.
“The trading environment for small businesses remains challenging. Our Business Monitor survey shows that almost half of small businesses are extremely concerned about cashflow, while one in five have worried about the future of their business due to late payments. We hope the Government provides an update on its Late Payments Consultation urgently, in order to support small businesses impacted by cashflow challenges.
“Beyond tax and payment issues, small firms continue to navigate energy costs, inflation, minimum wage increases, and other operational challenges – all factors that make planning and growth increasingly difficult in today’s uncertain economic climate.
“Business owners continue to cry out for pragmatic policies that make day‑to‑day operations easier, including simplified tax rules and measures tackling late payments. There’s also a clear appetite for government‑backed access to finance and digital investment, which are essential to long‑term growth.”
Debt‑interest costs are forecast to be nearly £4 billion lower next year than previously thought, which the government says will help protect spending on services like the NHS and public transport. Fiscal headroom against the government’s stability rule has increased to nearly £24 billion, supported by tighter controls on day‑to‑day contingencies and an ongoing focus on efficiency.
Real wages have risen more since the last election than they did over the first thirteen years of the previous government, according to Treasury analysis. The forecast suggests that, on average, people will be more than £1,000 a year better off after inflation by the time of the next general election.
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Falling borrowing costs are also expected to feed through to mortgage holders, with interest‑rate cuts projected to save families over £1,300 a year on a typical new fixed‑rate mortgage of £215,000 over 29 years. Alongside policies such as expanded free childcare, free breakfast clubs and the removal of the two‑child limit, ministers argue these trends show the current economic plan is working for households in Scotland and across the UK.
