Just days ago, the Office for Budget Responsibility (OBR) again downgraded its forecasts for the UK’s economic growth. They originally expected 2% growth in 2025, but have now revised that down to 1%. Even with this downward revision, the OBR has increased its growth forecasts for the following years. The economy will grow by 1.9% in 2026. It will then continue with a more moderate rate of growth, of 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029. As a result, by the fiscal year 2029-30, the economy is expected to be many billions of dollars larger compared to the first projections made during the October Budget.
In releasing her Spring Statement, new Chancellor Rachel Reeves said she was “appalled” at the projected figures. She maintains tackling economic growth as one of her top three big promises. She noted that the growth rate, while strong, is less than what had been anticipated before. The OBR, acting as the government’s official forecaster, increased its inflation forecast for this year to 3.2%. That forecast indicates that inflationary pressure is beginning to ease. So too by 2027, which is when they are projected to converge down towards the Bank of England’s target of 2%.
The change of tune in economic projections is a reflection of growing difficulties for the UK economy, largely due to a combination of ongoing inflationary pressures. The OBR's projections reflect cautious optimism for future years, with a gradual improvement expected as inflationary pressures ease and growth stabilizes.