Chancellor Rachel Reeves has defended her economic strategy as “working” in an uncertain global environment, even as the government’s forecaster reduced its growth forecast for the UK in 2026.
The Office for Budget Responsibility (OBR) lowered its expected growth rate for this year to 1.1%, down from 1.4% projected in last year’s Budget. However, the OBR upgraded growth estimates for 2027 and 2028 to 1.6% and now forecasts GDP per person to grow by 1.1% annually between 2026 and 2030.
Reeves announced the figures in her Spring Statement, highlighting that inflation is expected to be slightly lower than previously predicted—2.3% this year, down from 2.5% in November. She cautioned, however, that recent spikes in oil and gas prices following the Middle East conflict could alter these projections and limit potential interest rate cuts by the Bank of England.
Other highlights from the OBR report include:
- Unemployment is now expected to peak at 5.3% in 2026, up from 4.9% forecast at the Budget.
- The government’s borrowing headroom over the next five years has increased from £21.7bn to £23.6bn, providing additional fiscal flexibility.
Reeves emphasized that her plan focuses on long-term growth, strengthening global trade relationships, and leveraging artificial intelligence. In her Commons speech, she criticised previous Conservative governments, saying their multiple growth strategies left living standards lower than at the start of their terms.
Opposition figures remain sceptical. Former Chancellor Mel Stride said Reeves’ approach “is not working,” arguing that rising taxes are causing job losses and prompting skilled workers to leave the UK.
Reeves indicated she will outline three major economic choices later this month in a speech ahead of the autumn Budget, which she described as critical for shaping the country’s future.
