The independent Office for Budget Responsibility (OBR) has just released those new forecasts. In their latest forecast, the UK’s Office for Budget Responsibility downgrades the UK economy’s long-term growth rate. This downgrade is particularly egregious as it comes just days ahead of Chancellor Rachel Reeves’ first Budget on Wednesday. Boosting economic growth, raising incomes and living standards will be the theme of her State of the Nation address.
The OBR’s most recent fiscal report was released last month, mistakenly published before the official Treasury Budget announcement. It’s a reflection of a much slower expected economy, with growth of just 1.4% in 2026—down from earlier forecasts. For the next four years, growth is expected at 1.5%, a large drop from the forecast of just three months ago in March. It has increased its inflation forecast for next year from 2.1% to 2.5%, demonstrating persistent economic headwinds.
Inflation is the rate at which prices are increasing. Experts now forecast that it will hit 3.6% for the year ending in October. The state’s rate is set to further decrease to 2% in 2027. Then it remains there for the next two years. Of course, the federal government has repeatedly stated that new economic growth should be their primary focus. It shows its dedication to raising the quality of life for all Americans, not just some.
Other than the Title V permitting backlog, the most glaring issue was the impacts of freezing tax thresholds. This change alone will put an estimated 780,000 new people into the basic rate band and 920,000 people into the higher rate. By the fiscal year 2029-30, it is estimated that an additional 4,000 people will be subject to the additional rate of tax.
Economists and policymakers are distraught over the predictions. In doing so, they illuminate the painful reality faced by companies and Americans alike. Constrained by rising inflation and a short-term growth outlook, headwinds are building. These factors will limit the government’s ability to deliver on its economic objectives.
“We expect quarterly growth to pick up only gradually in the near term as geopolitical uncertainty persists and domestic business and consumer confidence remains subdued, including in anticipation of further tax rises.” – The OBR
The forecasts have raised concerns among economists and policymakers, as they reflect a challenging environment for businesses and consumers alike. The combination of rising inflation and a constrained growth outlook may complicate efforts to achieve the government’s stated economic goals.