Economic growth forecasts for the UK in 2025 have been halved from 2% to 1% at the chancellor’s Spring Statement today (26 Mar).
In what was called an “Emergency Budget” by the opposition, inflation expectations were also raised from 2.6% to 3.2% for this year compared to initial estimates made at Rachel Reeves’ Autumn Budget in October.
The Office for Budget Responsibility (OBR) said the downgraded economic outlook was driven by structural weaknesses in the ensuing months, but namely by elevated uncertainty.
Spring Statement at a glance
“Since the October forecast, developments in outturn data and indicators of business, consumer and market sentiment have, on balance, been negative for the economic outlook,” the OBR’s most recent report said.
“Around one-third of the lower growth this year reflects what appears to be structural weakness. The remaining two-thirds is due to what appear to be cyclical, temporary, factors including higher interest rate expectations, increases in gas prices, and elevated uncertainty.”
Near-term growth expectations may have taken taken a hit, but gross domestic product (GDP) forecasts for the next four years have been slightly increased from 1.8% to 1.9% in 2026, 1.5% to 1.8% in 2027, 1.5% to 1.7% in 2028 and 1.6% to 1.8% in 2029.
Likewise, inflation forecasts were lowered from next year, down from 2.3% to 2.1% in 2026.
The OBR anticipates inflation to settle at the Bank of England’s target of 2% from 2027 onwards.