Budget watchdog downgrades growth forecast for 2026 as Reeves defends plan

Chancellor Rachel Reeves said she had the “right economic plan” for the UK despite the budget watchdog slashing its forecast for growth this year.

The Office for Budget Responsibility indicated gross domestic product will increase by 1.1% in 2026, down from the 1.4% it forecast in November.

But the watchdog upgraded its forecasts for 2027 and 2028 from 1.5% to 1.6%.

Updating MPs on the forecasts in her spring statement, against the backdrop of the war in the Middle East, Ms Reeves said: “This Government has the right economic plan for our country, a plan that is even more important in a world that in the last few days has become yet more uncertain.”

She added: “The new forecasts from the Office for Budget Responsibility confirm that our plan is the right one – inflation is down, borrowing is down, living standards are up and the economy is growing.”

The Chancellor said the changes in GDP forecast took account of a fall in net migration and said average growth across the next five years was “largely unchanged” despite this year’s downgrade.

“But I am not yet satisfied with these forecasts,” she said, acknowledging “the economy is not yet working for everyone”.

Unemployment is to peak later this year and then fall in every year of the forecast period, ending the period at 4.1% – lower than it was at the start of the Parliament, the Chancellor said.

Borrowing is to reduce by “nearly £18 billion compared to the autumn”, and public sector net borrowing is expected to fall from 4.3% this year to 3.6% next year, then 2.9%, 2.5% and 1.8% in 2029-30, she said.

The Chancellor’s statement did not include any tax and spending changes, after Ms Reeves committed to delivering just a single budget a year.