The UK is weathering global challenges but rising deficit and defence costs loom over the economy
The UK is weathering global challenges but rising deficit and defence costs are looming over the economy, say leading audit, tax and business advisory firm, Blick Rothenberg.
Robert Salter, a director at the firm, said: “The latest data from the Office of National Statistics (ONS) shows that unemployment fell from 5.0% to 4.9% in April 2026. This slight decrease suggests that the UK is weathering global challenges like oil price volatility and US tariffs, but rising public sector deficit and the need to increase defence spending are looming over the economy.”
He added: “To pay for this, tax increases may be on the chancellor, Rachel Reeves’s agenda at the Autumn Budget. She will certainly be under pressure to either cut public sector spending or raise taxes – so far, attempts by the government to cut benefits have led to policy U-turns, whereas tax increases, such as to National Insurance Contributions (NICs) seem to have more ‘staying power.’”
Robert said: “A decrease in unemployment even if small provides some relief for government finances, as any increase in joblessness reduces tax receipts and increases the amount spent on social benefits. However, government borrowing was £24.3bn in April 2026, which is £4.9bn more than April 2025 – this increasing gap in public sector funding needs to be filled somehow to balance the government’s finances.”
He added: “In line with NATO commitments the UK government has said it will increase defence spending to 3.5% of GDP by 2035. The chancellor has neither confirmed nor denied she will use tax increases to pay for this, meaning she is still likely keeping that fiscal option on the table for now.”