Chancellor Confirms Downgraded Economic Growth Forecast
Chancellor Rachel Reeves has officially confirmed that the Office for Budget Responsibility (OBR) has downgraded its forecast for UK economic growth this year to 1.1%. The announcement was made during the Spring Statement this afternoon, where Reeves stated that "average growth across the forecast period is largely unchanged".
Revised Growth Projections
The OBR previously projected the UK economy to grow by 1.3% in 2026, but this has now been adjusted downward to 1.1%. However, the forecast indicates that economic growth is expected to pick up in the following years, reaching 1.6% in 2027 and 1.5% in both 2029 and 2030. Reeves explained that "while the OBR has adjusted the profile of Gross Domestic Product (GDP) so that it grows slightly slower in 2026, and faster in 2027 and 2028."
Unemployment and Inflation Trends
In addition to the growth downgrade, the OBR has increased its forecast for unemployment, now expecting it to peak at 5.3% this year before gradually falling to 4.1% by 2030. Recent figures show unemployment reached a five-year high of 5.2% in the three months to December. Meanwhile, inflation has fallen to 3%, though experts warn it could rise again due to the Middle East conflict, with rising oil prices potentially impacting swap rates and delaying Bank of England base rate cuts.
Government Response and Criticism
During the Spring Statement, Chancellor Reeves insisted that her economic plans are effective, claiming that people will be £1,000 better off by the next election in 2029. She asserted, "Inflation is down, borrowing is down, living standards are up." However, criticism has emerged from financial advisors. Rob Mansfield, an Independent Financial Advisor at Rootes Wealth Management in Tonbridge, commented to Newspage, "The government talks growth but has ramped up tax, crushing the chance of growth, this is further evidence that the tax and spend policy isn't working." He added that the upcoming Budget will be a crucial test for the Chancellor's policies.
