“A changing world” and “a generational challenge” – that is how the Chancellor described the global political and economic landscape when delivering her Spring Statement on 26 March 2025. And in the short time since, that context has significantly changed. The American President announced substantial trade tariffs on 4 April, which has been followed by plummeting stock markets across the globe, the American bond market starting to collapse and the President announcing a 90-day pause on some of the new American tariffs on 9 April, while other countries are considering, pausing or imposing retaliatory tariffs on the United States (US), as a trade war now arises between the US and China.
As the Chancellor faces such uncertainty and unpredictability, and the full effects of recent events remain unknown, how will she respond? What adjustments will she make to her ‘Fixing the Foundations’ plan for the UK’s public finances and economy at the UK’s next scheduled fiscal events, to respond to any shocks arising from recent global developments? Will any such adjustments appropriately factor in Northern Ireland (NI)?
Building on a previous Research Matters article explaining the general relevance of Spring Statements and other UK fiscal events for NI public finances and its economy, this article turns to Spring Statement 2025 and developments since, to briefly highlight NI-specific considerations in the lead up to UK fiscal events scheduled for this summer and the autumn. Read on to learn more …
Spring Statement 2025
Inflation and US political pressure
The Chancellor’s Spring Statement sought to respond to inflationary trends in the UK. Inflation had fallen from a high of 9.6% in October 2022, to 2.6% in September 2024, but was starting to rise again over the six months up to the Spring Statement. It continued to evade the Bank of England (BoE) target of 2%, requiring the Chancellor to make policy decisions to achieve that BoE target.
The Chancellor also was responding to the on-going war in Ukraine and mounting pressure from the US President on member countries of the North Atlantic Treaty Organisation (NATO) to provide more funding for their own defence. There also was increasing speculation about potential US trade tariffs.
The Chancellor sought to address those considerations in her Statement, stating as follows:
Since autumn, the world has changed. Europe is now facing a generational challenge to its collective security. Global economic uncertainty has increased sharply, growth has slowed in many of Britain’s major trading partners, and borrowing costs have risen across most advanced economies. As an open trading economy, the UK is not immune to these challenges.
Economic growth forecasts
Within that challenging context, the Chancellor stated economic growth was one of the UK Government’s key priorities, explaining:
The OBR forecasts the economy to grow by 1.0% in 2025, slower than expected in October. Growth is forecast to accelerate to 1.9% in 2026. The OBR has increased the growth forecast in 2026 and every year thereafter.
The responsivity forecasts provided by the Office for Budget Responsibility (OBR) informed the Chancellor’s thinking; recast from those made for Autumn Budget 2024 to reflect more current data. These new forecasts factored in potential trade tariff impacts into its new UK economic growth forecast – such as their potential impact on UK Gross Domestic Product (GDP) – assuming as follows:
… if global trade disputes escalate to include 20 percentage point rises in tariffs between the USA and the rest of the world, this could reduce UK GDP by a peak of 1 per cent and reduce the current surplus in the target year to almost zero.
Increased defence spending
In her Spring Statement, the Chancellor announced a £2.2 billion (bn) uplift in UK defence spending. NI benefitted from that spending, with the UK Government awarding a defence manufacturing contract to a local business. The contract is valued up to £1.6bn and is to provide 200 jobs in the greater Belfast area.
However, it is presumed that increased UK defence spending will not increase NI’s block grant from central government – no ‘Barnett consequential’ will arise – because defence is not devolved under the institutional and financial ‘rules’ of current devolution. A DoF Official referenced no consequential at a meeting of the Assembly’s Finance Committee on 1 April 2025.
The DoF Officials also commented on the Chancellor’s decision to increase defence spend; understood to be funded by His Majesty’s Treasury (HMT) ‘Reserve’. However, the Officials explained that if that was not the case, and instead the stated increase was funded from money taken out of other UK Departmental budgets, then:
Anything they take from departmental spending and put into Defence will either be a reduction for us or it will be less money, either way it impacts on us.
Bottom line, if funded from money taken away from UK Departmental budgets, and not the UK Reserve, then block grant implications would arise for devolved nations, including NI – resulting in negative Barnett consequentials that would reduce the NI block.
The NI Finance Minister stated at the end of March that he was not supportive of the increased defence spending announcement, commenting as follows:
Instead of prioritising investment in public services, the Westminster Government has decided to invest £2.2bn in a renewed arms race, when what we actually need is more doctors, nurses, teachers and homes for families and workers to live in. We need investment in people and communities, not more arms and austerity.
However, others welcomed the increase, remarking:
While this commitment is welcome, what remains lacking is a comprehensive plan to strengthen our defence capabilities. Given the current global instability, the Government must make this a top priority.
Welfare changes
In her Spring Statement, the Chancellor announced a number of changes to the welfare system, such as a review of the Personal Independence Payment (PIP) assessment, plus further changes to Universal Credit (UC), including:
- Health-related universal credit for new claimants will be reduced from £97 to £50 per week from April 2026 and will not rise with inflation until after 2030
- Under-22s will no longer be able to claim the health-related element of universal credit
- For existing claimant’s health-related payments will be frozen at £97 per week until 2030, with a new top-up payment introduced for those with the most severe conditions
- The Universal Credit standard allowance for new and existing claims above inflation from 2026-27. This means the standard allowance weekly rate for a single person aged 25 and over will increase from £92 in 2025-26 to £106 in 2029-30.
Based on the latest ONS data (March 2025), NI has the highest economic inactivity level in the UK – 26.5%. Consequently, the Chancellor’s welfare reforms are likely to disproportionately impact NI in an adverse manner, when compared to other UK regions. The NI Finance Minister reacted to those reforms, stating:
The Chancellor has chosen to wield cuts on benefits, harming those most in need. We want a welfare system that is fair and supports citizens – these latest punitive measures are not the answer.
Other policy changes
The Chancellor announced other policy decisions in her Statement, including public sector reform, investment for growth and increased capital expenditure. As a result – under Barnett – NI will receive an additional £14m in 2025/26.
On 28 March, the NI Finance Minister expressed concern about the inadequacy of that funding, explaining:
While the Westminster Government today announced £14m of new funding, this will not meet the many significant pressures on our budgets.
Transformation Fund
As part of the UK Government’s aim to both increase efficiencies and reform the public sector in Great Britain (GB), the Chancellor also announced a £3.25b ‘Transformation Fund’, to:
… support the fundamental reform of public services, seize the opportunities of digital technology and artificial intelligence (AI), and transform frontline delivery to release savings for taxpayers over the long term.
However, as DoF Officials explained during an Assembly Finance Committee meeting on 1 April, NI will wait and see what Barnett consequentials may arise from allocations made by central government to UK Departments under this Fund:
… on the allocations out of that fund…it will depend on which Whitehall departments get allocations from it. We do not get it on the £3.25 billion; we will get it on the allocations.
Increased NICs and worker wages
Other changes announced in the Chancellor’s Autumn Budget 2024 become effective at the time of decisions taken in her Spring Statement. Those from the autumn concern employers’ National Insurance Contributions (NICs) and workers’ wages. On 1 April, the NI Finance Minister explained how both those impact private and private sectors in NI, as in the rest of the UK, stating:
From next week local businesses will face increased bills following the hike in National Insurance contributions previously imposed by Westminster however, they will be left disappointed again by the lack of investment by the Chancellor.
The Finance Minister continued:
The public sector will also incur additional costs for increased National Insurance contributions. The funding that will be provided for this will fall far short of what is needed.
He further highlighted the impact of the above changes on NI’s finances in the coming years, stating:
There is no doubt that the financial outlook still remains incredibly challenging particularly given the Westminster Government’s continued policy of austerity.
Trade tariffs
On 4 April, shortly after the Chancellor’s Spring Statement, the American President announced global trade tariffs on goods entering the US; resulting in a 10% tariff on UK goods and a 20% tariff on goods from the European Union (EU). The NI Economy Minister commented that day that the tariffs were:
… deeply regrettable. A trade war will only fuel inflation and risk recession.
For NI, The Windsor Framework afforded NI a unique trading position within the UK following the UK’s exit from the EU – providing NI access to both the EU single market and the UK market. The American trade tariffs therefore present NI with 10% tariffs on the majority of goods going into the US, in line with the rest of the UK. As InvestNI explains on its website:
From an export perspective, Northern Ireland is part of the UK Customs Territory and any tariffs imposed on UK exports by the US will apply equally in Northern Ireland. The reciprocal tariffs announced by President Trump on UK imports has been set at 10 per cent – this is the lowest rate of reciprocal tariffs to be applied and this will not increase under the current Executive Order. Businesses should be aware that negotiations are ongoing between the UK and US governments on an economic agreement. If agreement is reached between both parties, tariffs may be reduced.
Some in NI perceive the US trade tariffs as a potential opportunity to compete with the Republic of Ireland (RoI), by attracting companies operating in RoI to NI. Commenting on NI’s position on 3 April, a local journalist explained:
Two parts of this island face different tariffs when selling to the US, so Northern Ireland Businesses are covered by UK tariff of 10%, Republic of Ireland Businesses covered by the EU tariff of 20%, in some respects that could give certain businesses, in certain sectors, a competitive advantage.
However, the journalist tempered his statement, saying:
I wouldn’t get too excited about this or overemphasise that because you have to look at the impact of this in the round and what these measures mean for global trade and global growth.
Whereas on 6 April, an academic spoke about NI’s unique position post-UK exit, stating:
It would be good to see the EU and the UK be mindful of NI’s position in all this, in terms of retaliation in terms of tariffs, because the last thing we want to see is further divergence which would create further issues around the Windsor Framework.
Subsequently, in a debate in the House of Commons on 8 April, the NI Secretary of State (SoS) addressed the possible impact of the US trade tariffs for businesses, highlighting they:
… can reclaim any such tariff through the existing duty reimbursement scheme in cases where US imports into Northern Ireland do not then enter the European Union.
However, during that Question Time, NI Members of Parliament (MPs) expressed counter views. One observed that:
… in the event of EU retaliatory tariffs, goods imported from the United States into Northern Ireland will by default be effectively forced down the red lane.
While NI businesses would be reimbursed by central government due to differing EU and UK tariff rates potentially applying if the US 90-day pause is lifted, other questions and potential impacts still could arise. For example, could NI businesses be left at a competitive disadvantage to other parts of the UK not being impacted by such a difference? Could a delay in reimbursing the additional tariff cost affect NI businesses’ cash flow? Could this increased amount of red tape and customs checks on goods arriving into NI from the US create additional costs for NI firms – for example, administrative costs? Could those costs impact some NI sectors more than others?
NI Executive Budget 2025/26
As noted in an earlier article, the spending power available to the Executive and its Departments comprises funding from: the UK Government; monies available through the Executive’s fiscal levers (such as rating and borrowing); and, centrally administered funding for projects (such as the Irish Government’s ‘Shared Ireland’ Initiative and related Fund and other).
When the Executive agreed its Budget 2025/26 on 3 April 2025, the Finance Minister a day later stated:
There is no doubt that the Executive’s finances remain under pressure. While the 2025-26 financial position remains challenging for all Departments, the Budget agreed by the Executive clearly prioritises their Programme for Government priorities, and, excluding earmarked allocations and in-year transfers, provides every Department with an uplift on its 2024-25 budget position.
When later making a Statement about Executive Budget 2025/26 in the Assembly on 7 April, the NI Finance Minister declared:
I intend this to be the last single-year Budget, now that the Treasury has committed to undertaking a multi-year spending review. I believe that the introduction of a multi-year Budget will be a game changer, providing Departments with the ability to undertake longer-term planning.
The Minister’s Statement echoed a report published by the Assembly’s Public Accounts Committee (PAC) on 3 April – entitled Major Capital Projects: Follow-up Report, which had identified a number of issues, including the need for:
… projects supported by a multi-year funding package, and provide surety that a project will not stop once it starts.
Similarly, on 7 April 2025, the House of Commons Northern Ireland Affairs Committee (NIAC) published a report – entitled Funding and delivery of public services: follow up – and therein pointed to the lack of multi-year budgets, recommending:
The Government must provide stable, sustainable, multi-year funding as part of future budget settlements, to enable the Northern Ireland Executive and service providers to plan for long-term public services.
The day after the NI SoS spoke in the House of Commons, the NI Minister for the Economy attended a meeting of the Assembly’s Committee for the Economy, where the Minister engaged with some of the many issues outlined above. She began by acknowledging the ‘significant challenge of the decision of president Trump to impose tariffs on the world’. She further advised that she had met with the UK Trade Secretary and with the RoI Tanaiste; noting that she had asked both governments to keep NI’s unique circumstances in mind, to minimise divergence between the UK and the EU. She also told the Committee that there had been agreement amongst the two governments and her for ‘early, frequent and open engagement’; noting discussion was continuing.
Highlighting her meeting with business leaders on 3 April, she drew the Committee’s attention to her ‘five asks’ of the British and Irish Governments to address NI’s ‘unique circumstances’, including the need for additional economic support and an advice service for NI businesses, along with her commitment to engage with local businesses as ‘this complex situation unfolds’.
During the 9 April Committee meeting, a Committee Member also asked the Economy Minister whether her party’s representatives, including the First Minister and her, were focussed on protecting the all-island economy and whether they were advocating for businesses in NI that could be impacted by higher US tariffs in the EU.
In response, the Minister stated ‘it was a very complex situation that we’re facing’. She further explained that:
All the uncertainty as well is really destabilising for businesses and a key concern that was reflected in discussions that we had earlier in the week with businesses was that this has the potential not just to impact on business in terms of the tariffs themselves but the fact that this could turn into a global slow down and I thing that’s where none of us want to be …
She also stated during the Committee meeting that:
None of us has clarity at the minute in respect of what tariffs mean. I have had the opportunity over recent days to engage with our business community and key business leaders and trade union leaders, and the lack of clarity, the lack of information is something that is being highlighted to them.
And further commented that:
We of course as a department are working hard to understand what the implications are, to understand the Executive Order itself …
I know of businesses that are subject to the tariffs that have already been implemented in relation to steel and aluminium who are exporting to the US and who have goods that are caught up at customs in terms of being processed at the minute …
Adding:
The narrative that we’re not so badly off because we only got 10% tariffs isn’t a good one because 10% tariffs are bad, all tariffs are bad for business, so I thing it’s important to recognise the impact that this is going to have.
Potential issues arising through a NI lens
The US trade tariffs sparked varied reaction across the globe, which continues since the American President’s 90-day pause. Many countries currently are entering negotiations with the US, or seeking to negotiate with it. Others are retaliating or pausing any retaliation to the US, with a trade war commencing between the US and China. The UK is amongst the countries negotiating, while also engaging with EU member states, including the RoI, which have paused EU retaliatory tariffs. At present, no clear end dates are in sight for any of this.
Inevitably, this changed political and economic landscape is shaping next steps that will be taken by the Chancellor and the NI Executive in determining how implications arising from the current context could be addressed and mitigated as best as possible in the short, medium to long term, alongside many other considerations requiring attention.
Informing such consideration are a number of issues, such as:
- Will the Chancellor be in a position to comply with her specified fiscal rules and continue to meet them two years early, while also introducing new measures aimed to ‘reform the state and grow the economy’, despite the significantly changed political, financial and economic context across the world?
- Within that challenging context, what are the Chancellor’s next steps for UK Budget 2025/26 and beyond?
- In the context of future UK fiscal events:
- How now will the UK Spending Review in June 2025 conclude?
- What will the Chancellor’s anticipated Autumn Budget in October 2025 include?
- How in turn will the above UK fiscal events impact Executive Budget 2025/26 and the Executive’s future Budgets?
- How will the Executive and individual Departments seek to protect NI public finances and its economy over the remainder of the Assembly’s current mandate (2025-2027)?
- How will NI Departmental Ministers and Officials seek to engage with the UK Government, including the Chancellor, His Majesty’s Treasury and the UK Department of Trade, and robustly represent the need, for example:
- To protect NI public services that already had been facing a series of challenges before the current uncertainty and unpredictability arose?
- To advocate and secure multi-year budgets going forward?
- How will they do the same with the RoI Government?
- In the broader NI macro-economic context, what issues have the Executive – in particular, the NI Finance and Economic Ministers – prioritised as most important in supporting NI to ‘[go] further and faster’, following on from the Chancellor’s Spring Statement 2025 and subsequent developments, such as the American President’s trade tariffs currently in place and those paused, which compound already challenging times in NI?
- Beyond asking central government for more money, what will the Executive do within the boundaries of its existing powers under current devolution – for example, use of fiscal levers available to the Executive?
- Would US trade tariffs – those currently in place and those paused – impact any Irish Government allocations to NI projects under RoI’s Shared Island Initiative and Fund?
As this article highlights, much remains unknown for NI’s public finances and its economy. A close watching brief is required in the time ahead, to scrutinise and timely ask relevant and robust questions, which aim to increase transparency and accountability in all levels of government.
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