The Office for Budget Responsibility has cut its forecast for UK growth in 2027 to 1%, down from 1.6% in its previous outlook, in forecasts published alongside Chancellor John Healey's first Budget on Wednesday 28 October. Growth in 2026 was upgraded slightly to 1.2%, up from 1.1%, with the watchdog then expecting 1.6% in 2028, 1.8% in 2029 and 1.7% in 2030. The downgrade reflects the drag from the war in the Middle East, higher energy prices and borrowing costs, and trade tensions acting on global growth.

Growth cut, 2026 nudged up

On inflation, the OBR's annual-average figures tell a slower story than a single peak number. Inflation is expected to average 3.1% in 2026 and 3.4% in 2027, peaking at around 3.75% in early 2027 as January household energy bills feed through, then averaging 2.1% in both 2028 and 2029 before reaching 2% in 2030. Those are annual averages: they should not be mixed with quarterly peaks published separately, which put the peak at a slightly different level in the first quarter of 2027. September 2026 inflation itself was 3.5%, the highest since October 2025, linked in coverage to energy prices from the Iran war.

Inflation on an annual-average basis

The fiscal cushion shrank with the forecasts. Headroom against the government's stability rule falls to £15 billion in 2029-30, linked in press coverage to a £14 billion rise in debt-interest costs, though Healey told Parliament the Budget still puts the public finances on track to eliminate the current budget deficit within three years.

Sources: Reuters and PA via The Oldham Times.