OBR cuts UK growth forecast for 2027 in John Healey's first budget

By The Financial Edition · 28 October 2026 · 15:46 GMT · The Guardian Business · 1 min read

Photograph: Diego Delso, delso.photo · CC BY-SA · sector illustration, not event evidence

Growth and Inflation Forecasts

The Office for Budget Responsibility (OBR) upgraded growth for this year from 1.1% to 1.2%, supported by AI-related business activity. However, the watchdog cut its 2027 growth estimate from 1.6% to 1% as the impact of the conflict in the Middle East weighs on the economy. Consumer inflation is forecast to reach 3.5% this year, up from a previous estimate of 2%.

Chancellor's Measures and Borrowing

Chancellor John Healey announced a temporary rise in tax on banks to fund energy support, including £100 blanket payments for 20 million households and plans to abolish standing charges on gas bills. The exchequer is spending £14bn more on debt interest due to rising global borrowing costs. The OBR reported that fiscal headroom against the government's main rule fell to £15bn, down from £23.6bn previously left by Rachel Reeves.

Jargon, explained.

fiscal headroom: The margin the government has against its own fiscal rules, based on economic forecasts.

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