Rachel Reeves to boost UK defence spending as public debt surges

Today’s agenda: Black Sea truce; threat to Nvidia’s sales in China; Big Read on Russia’s Gazprom; FT View on “Signalgate”; and Henry Mance visits Spain’s 20-storey ghost hotel

Good morning. UK chancellor Rachel Reeves unveils her Spring Statement today against a grim economic outlook for the country. Here’s what we know.

What to expect: Reeves is set to boost defence spending by £2.2bn, taking it to 2.36 per cent of GDP in the 2025-26 financial year. This will be funded by cuts to overseas aid and the Treasury reserve. The chancellor will also publish a forecast by the Office for Budget Responsibility, which is expected to halve its growth projection for 2025. The independent watchdog will also reveal a hole in the public finances of about £15bn. Reeves will try to patch this up with cuts to welfare and broader government spending, but she has been unable to persuade the OBR that her reforms can trim a net £5bn from the welfare bill.

Reeves’ challenge: Higher interest rates and weaker growth have blown the chancellor’s fiscal plans off course, with the UK’s public debt burden surging faster than that of any other big advanced economy since the eve of the Covid-19 pandemic. Economists warn that the spending cuts in today’s statement would provide only a temporary fix to deeper budgetary issues associated with rising age-related outlays and demands for a rearmament drive.

Head to FT.com for live updates as the chancellor addresses MPs today, and sign up for our Newswrap newsletter to get an evening round-up of the key points from her speech.

Here’s what else we’re keeping tabs on today:

• Economic data: The UK has its February consumer price index, while France reports consumer confidence data.

• Results: Commerzbank reports.

Join Financial Times experts tomorrow for a subscriber-only webinar, as they discuss Ukraine’s future with Russia’s full-scale invasion entering its fourth year. Register for free.

Five more top stories

1. The US said it had reached agreements with Ukraine and Russia for a ceasefire in the Black Sea, following talks with both parties in Saudi Arabia. The deal fell well short of the Trump administration’s proposed 30-day ceasefire, and it remains unclear when the new agreement will be implemented.

2. Exclusive: Pirelli’s board is pressing China’s Sinochem, its largest investor, to cut its stake over fears that the Trump administration’s hawkish position on Beijing ownership of American assets will thwart the Italian tyremaker’s US expansion. Silvia Sciorilli Borrelli has more from Milan.

3. Signs that investors in the US bond market are baking in higher inflation would be a “major red flag” that could upend rate-setters’ plans to cut interest rates, a top Federal Reserve official told the FT. The remarks from Austan Goolsbee come after a closely watched poll showed households’ long-term inflation projections hit the highest level since 1993.

4. Exclusive: Nvidia’s sales in China could be affected by environmental curbs if Beijing enforces them more strictly. Regulators are advising Chinese groups to use chips that meet stringent energy efficiency rules in data centres, according to documents seen by the FT. People with knowledge of the matter said tech giants such as Alibaba and Tencent had been quietly discouraged from buying Nvidia chips.

5. Exclusive: PwC has delayed payouts to recently retired partners in Hong Kong and mainland China as it navigates the financial fallout from its role auditing Evergrande. Several equity partners who retired in recent months have yet to be repaid any of the capital they contributed when they joined the partnership, a delay to the normal schedule for repayment that would help the firm conserve cash.

The Big Read

After years of benefiting from its monopoly on Russian pipeline gas exports, Gazprom is struggling to recover from record losses following Vladimir Putin’s full-scale invasion of Ukraine. “The entire business structure was built in an environment of constant growth,” said a person close to the state-owned energy giant. “But now everything has changed.”

We’re also reading . . . 

• ‘Signalgate’: Donald Trump is doing enough harm to US standing in the world without adding dangerous ineptitude to the list, writes our editorial board.

• Europe’s Starlink: The EU is proposing to fund a homegrown alternative to Elon Musk’s satellite system, following US threats to switch off the company’s broadband services in Ukraine.

• mRNA vaccines: Are they the White House’s next target? Once researchers start to wonder if the government might pull support, the damage is done, writes Anjana Ahuja.

• War in Gaza: Israel’s siege has created a severe currency shortage, fuelling a lucrative black market for cash and forcing some to mend tattered bills by hand.

Chart of the day

A Trump administration proposal to impose stiff levies on Chinese-made ships entering US ports is sowing panic in American agriculture, with farmers saying the added cost threatens exports of wheat, corn and soyabeans.

Take a break from the news . . . 

On the south coast of Spain, there is a four-star hotel that should never have been built and has never been occupied. Yet the 20-storey El Algarrobico is somehow resisting all attempts to destroy it, writes Henry Mance.