OBR slashes UK growth forecast for 2027 despite Healey’s budget measures
Summary
The UK Office for Budget Responsibility cut its 2027 growth forecast to 1% from 1.6%, citing the economic effects of the Middle East war and higher energy costs. Chancellor John Healey announced support for households and businesses, but the OBR expects inflation to reach 3.5% this year and warned that living standards and public finances remain under pressure.Key Facts
- The OBR raised its forecast for UK growth this year from 1.1% to 1.2%, citing stronger-than-expected performance that included AI investment.
- The OBR cut its 2027 growth estimate from 1.6% to 1%.
- The OBR expects inflation to reach 3.5% this year, up from its March forecast of 2%.
- Healey said higher borrowing costs linked to financial market fallout from the conflict added £14bn to debt interest costs.
- Healey announced £100 payments for 20 million households, costing £2.6bn, and a plan to abolish gas-bill standing charges.
- Healey said the government would temporarily raise taxes on banks to help pay for energy support.
- The OBR said Healey would have £15bn of headroom against the main fiscal rule, down from £23.6bn under the previous budget.
- The OBR expects inflation-adjusted disposable income per person to fall in the short term, then rise modestly before the end of the current parliament.
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