CHANCELLOR Rachel Reeves has confirmed the Office for Budget Responsibility (OBR) has downgraded UK economic growth for this year to 1.1% as experts say it “highlights a fragile UK economy”.
Labour’s Reeves announced in the Spring Statement this afternoon that “average growth across the forecast period is largely unchanged”.
She added: “While the OBR has adjusted the profile of Gross Domestic Product (GDP) so that it grows slightly slower in 2026, and faster in 2027 and 2028.”
The OBR previously forecast the UK economy to grow by 1.3% in 2026 – but it is now 1.1%.
It expects economic growth to pick up in 2027 and 2028 to 1.6%, and then 1.5% in 2029 and 2030.
The OBR has also increased its forecast for unemployment, now expecting it to peak at 5.3% this year before it falls gradually to 4.1% by 2030.
Unemployment reached a five-year high of 5.2% in the three months to December, the latest figures show.
This comes as inflation fell to 3% – though experts fear it will start going up again due to the Middle East conflict. Oil prices are rising and that is already feeding through into swap rates, which could lead to mortgage rates rising and lead the Bank of England to delay its base rate cuts.
Reeves insisted during the Spring Statement that her economic plans are working and people will be £1,000 better off by the next election in 2029, adding: “Inflation is down, borrowing is down, living standards are up.”
It reflects a fragile backdrop
Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, said tax rises in the Autumn Budget mean Brits are struggling.
He added: “The government talks growth but has ramped up tax, crushing the chance of growth, this is further evidence that the tax and spend policy isn’t working.
“We’ve got six months or so till the Budget and we’ll have to see whether the penny drops for the Chancellor.”
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said the UK is in a fragile position.
“A downgrade to 1.1% isn’t dramatic, but it reflects a fragile backdrop. Growth hasn’t collapsed, it’s just not accelerating with conviction. The revision likely reflects weaker consumer confidence, global uncertainty and persistent cost pressures. When businesses delay investment and households stay cautious, growth softens.
“That’s not ideological, it’s cyclical reality. The more important point is forward momentum. The OBR still expects recovery in 2027 and beyond, which suggests this is a slowdown in pace, not direction. As for the Middle East, markets will react quickly, but forecasts are built on central scenarios. If energy prices spike materially and stay elevated, projections will need revisiting.
“If volatility fades, this remains a modest recalibration not a structural warning sign. Downgrades matter, but context matters more. What businesses and households need now is stability and clarity, not constant recalibration of expectations. Confidence drives growth.”
Faster growth promised for 2027 will become a mirage
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said we can forget about these figures as the conflict in the Middle East will make inflation rise again.
He added: “The OBR generally takes a ‘market snapshot’ to finalise its numbers weeks before a statement. They will have missed the full weight of this week’s escalation. If the conflict worsens, the ‘faster growth’ promised for 2027 will become a mirage instead of the current distant hope.
“The downgrade of the 2026 growth forecast to 1.1% highlights a fragile UK economy struggling under the weight of high taxes, labour costs, and over-regulation. These projections are ‘stale on arrival’ due to the escalating Middle East conflict.
“With oil and gas prices surging, the OBR’s assumptions regarding falling inflation will be invalidated within weeks. What price now on the Bank of England being forced to raise rates to combat energy-driven inflation?”
