OBR slashes UK growth forecast for 2027 despite Healey’s budget measures
The Office for Budget Responsibility has cut its forecast for UK economic growth in 2027 from 1.5% to 1%, citing the economic fallout from war in the Middle East. The downgrade, alongside higher inflation and weaker income prospects, suggests households and public finances will remain under pressure despite measures in John Healey’s first budget.
The OBR raised its forecast for growth this year from 1.1% to 1.2%, but expects inflation to reach 3.5%, compared with 2% in its March forecast, and warned it could approach 4%. Healey announced £100 payments for 20 million households, costing £2.6bn, and plans to abolish gas standing charges; he also left £15bn of headroom against the main fiscal rule, down from £23.6bn in the spring. The OBR said real disposable income per person has barely grown since just before Covid and may be only about 2% above pre-pandemic levels by the early 2030s.
In short
- The OBR cut its 2027 UK growth forecast to 1%.
- Inflation is forecast at 3.5% this year.
- Healey announced £100 payments for 20 million households.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
The budget’s £100 payments to 20 million households and planned removal of gas standing charges offer immediate help with energy costs, while the OBR’s higher growth forecast for this year suggests some near-term resilience. Leaving £15bn of fiscal headroom also preserves a buffer against future shocks, even as the outlook worsens.
The case against
The growth downgrade, higher inflation and weak income prospects suggest the budget may offer limited relief against sustained pressure on household finances and public services. The smaller fiscal buffer leaves less room to respond if the economic fallout from the Middle East conflict deepens or the forecast proves too optimistic.
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