OBR Cuts 2027 UK Growth Forecast to 1% as Headroom Falls

The UK’s Office for Budget Responsibility forecasts economic growth of 1.2% in 2026, slightly above its previous estimate, but cut its 2027 projection sharply to 1.0% from 1.6%, citing a more difficult outlook following the Iran war and other global pressures. Growth is projected to recover to 1.6% in 2028 and 1.8% in 2029, before easing to 1.7% in 2030 and 1.6% in 2031. Chancellor John Healey said the government remains committed to its fiscal rules, with about £15 billion of headroom—down from £23.6 billion in the previous forecast—while higher borrowing costs are adding to debt-interest spending. The budget outlook also includes a forecast deficit of 4.2% of GDP this year, narrowing to 3.4% next year, and plans for cost-of-living support alongside a pledge to avoid broad tax increases and deep public-service cuts.