Mar 26, 2025, 4:48 PM
Mar 26, 2025, 1:00 PM

Chancellor slashes UK growth forecast as inflation soars

Highlights
  • The Office for Budget Responsibility forecasts UK economic growth will reach only 1% in 2025.
  • Chancellor Rachel Reeves announced measures to tackle the projected £36.1 billion deficit and emphasized long-term reforms.
  • Despite the downward revision for 2025, the OBR expects growth to improve from 2026 onwards, reflecting potential policy impacts.
Story

In March 2025, the Office for Budget Responsibility (OBR) released new economic forecasts regarding the UK economy. The OBR announced that the growth rate for 2025 has been reduced from an anticipated 2% to just 1%, impacting fiscal planning and public spending predictions. Chancellor Rachel Reeves, delivering her spring statement, expressed her dissatisfaction with these metrics and pledged to implement reforms to stimulate economic growth. Simultaneously, the OBR projected an increase in growth rates post-2025, expecting the economy to grow by 1.9% in 2026 and gradually declining afterward, despite potential economic instability stemming from global factors. The chancellor's remarks highlighted that achieving economic growth will require significant long-term changes and strategic investments, including reforms in housing policy and pension systems. However, there are concerns regarding an anticipated budget deficit of £36.1 billion for 2025-26, driven by rising inflation forecasts of 3.2% and potential higher interest rates, which will further strain public finances. These developments have led to an increased focus on managing public debt while balancing economic growth aspirations amidst global uncertainties and market volatility. The volatile economic landscape may challenge Reeves' plans, with predictions that the government will struggle to meet fiscal targets without additional cuts or tax increases in the future, prompting ongoing discussions about the viability of current spending plans.

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