By Fatma Younis
The UK’s economic growth forecast for next year has been sharply reduced to 1 per cent, down from a previous projection of 1.6 per cent, as the Office for Budget Responsibility warned of “global economic storms” linked to the war on Iran. The downgrade was published on Wednesday alongside the autumn Budget.
GDP Projections Revised Downward
The OBR said gross domestic product is expected to grow by 1.2 per cent this year, slightly higher than the earlier 1.1 per cent estimate. However, growth is then projected to slow to 1 per cent in 2027 before recovering to 1.6 per cent in 2028, 1.8 per cent in 2029, 1.7 per cent in 2030 and 1.6 per cent in 2031.
Fiscal Headroom Reduced
Chancellor John Healey confirmed that fiscal headroom will fall to £15 billion in 2029/30, down from a previous forecast of £26 billion, after a £14 billion jump in debt interest costs over the past year. The watchdog said the UK’s economic and fiscal position remains very challenging, with government debt as a share of GDP at historically high levels.
What Slower Growth Means for Households
When GDP growth slows, it can lead to pay freezes, job losses and reduced tax revenues. A recession occurs if GDP contracts for two consecutive quarters. The OBR noted that since 2008 repeated adverse shocks have contributed to persistently weak growth and elevated borrowing.
