OBR forecasts UK inflation to hit 3.75% as growth slows to 1% in 2027
The OBR projects inflation to rise to about 3.75% by early 2027 and GDP growth to slow to 1% the following year, while national debt is set to rise.
By Felo News Desk · Published
Britain’s official forecaster, the Office for Budget Responsibility (OBR), said on Friday that inflation will peak at roughly 3.75% by the start of next year and that gross domestic product (GDP) growth will slow to 1% in the following year.
What happened
The OBR’s latest projections show inflation averaging 3.1% in 2026 and 3.4% in 2027, a rise from its earlier forecasts of 2.3% for 2026 and 2% for 2027. The increase is driven mainly by a jump in household energy bills expected in January. The watchdog also revised its growth outlook, raising this year’s GDP growth to 1.2% from 1.1% but cutting the 2027 forecast to 1% from a previous 1.6% estimate. It now expects growth to rebound to 1.6% in 2028, then 1.8% in 2029, 1.7% in 2030 and 1.6% in 2031.
What the reports add
- Both Independent pieces note that the 2% inflation target set by the Government and the Bank of England will not be reached until 2028.
- National debt as a share of GDP is projected to rise from 96% this year to 97% in 2028/29 before falling back to 96% in 2031.
- Government borrowing is expected to exceed previous forecasts by about £18 billion this year, £16 billion in 2027/28 and an average of £11 billion a year thereafter.
- Fiscal headroom will shrink to £15 billion in 2029/30, down from a prior estimate of £26 billion, before improving to £22 billion by 2031.
- Unemployment is forecast at 5% for 2026, rising to 5.1% in 2027 and easing to 4.9% in 2028, with a further fall to 4.5% in 2029.
What was said
“Global economic storms”
Chancellor John Healey warned the economy had been hit by “global economic storms” in his first autumn Budget, as reported by the Independent.
“If you go back to just before Covid and take that as your …”
OBR economist David Miles said the weakness in living standards represents “a pretty grim picture”.
How it came about
The OBR’s outlook follows a series of recent UK economic updates, including the forecast of a contraction in August GDP published earlier this month, which anticipated a 0.3% decline in August after modest growth in June and July. The new figures reflect rising energy costs and the impact of the chancellor’s cost‑of‑living measures, such as removing VAT from electricity bills and the standing charge from gas bills.
Key facts
- OBR expects UK inflation to peak at about 3.75% by early 2027. (independent.co.uk)
- Inflation is projected to average 3.1% in 2026 and 3.4% in 2027. (independent.co.uk)
- UK GDP growth is forecast at 1.2% for 2026, slowing to 1% in 2027. (independent.co.uk)
- National debt as a share of the economy is set to rise over the next three years. (independent.co.uk)
- Chancellor John Healey described the economy as hit by “global economic storms”. (independent.co.uk)
