UK Budget resets macro outlook after OBR cuts 2027 growth forecast to 1.0%
Published · Updated
What happened
The government used the Budget to publish a revised fiscal and economic outlook. In that update, the Office for Budget Responsibility lowered its 2027 UK growth forecast to 1.0% from 1.6%, and ministers said higher inflation linked to the Iran war would add around £14bn to debt-interest costs.
Why it matters
A new official forecast changes the baseline used for fiscal planning, market pricing and departmental expectations. The combination of lower growth and higher debt-interest costs narrows space for new giveaways and raises the chance of follow-on tax, spending or borrowing choices if the outlook weakens further.
The UK Budget published in the past 24 hours set a new official macroeconomic baseline, with the Office for Budget Responsibility cutting next year's growth forecast to 1.0% from 1.6% in the spring and the government saying higher inflation linked to the Iran war would add about £14bn to debt-interest costs. The package also included a £100 household payment framed as support through higher global prices. Together, the forecast revision and added debt-service estimate tighten the Chancellor's room for further support without adding borrowing or offsetting measures.
Watch for
UK Debt Management Office gilt sale results on 2026-10-29 and 2026-10-30, including bid-to-cover and tail metrics versus recent auctions Office for Budget Responsibility publication of full Budget forecast tables and fiscal headroom assumptions by 2026-10-30 Bank of England public remarks or release on inflation pass-through from energy prices by 2026-10-31 HM Treasury confirmation of eligibility, delivery route and payment timing for the £100 household support by 2026-10-31
Sources
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