The Office for Budget Responsibility’s (OBR) Economic and Fiscal Outlook - Spring 2026

The Office for Budget Responsibility’s (OBR) Economic and Fiscal Outlook - Spring 2026

The OBR published its outlook today (Tuesday 3 March 2026) alongside the UK Spring Statement. This reflects the key projections and assumptions shaping the UK economy and public finances over the next several years.

Economic growth projections

The OBR’s baseline growth forecasts show a modest but steady expansion of the UK economy over the medium term:

 2026: GDP expected to expand by 1.1 %, revised down from earlier projections.

2027–2028: Growth accelerates to 1.6 % per year.

2029–2030: Growth continues around 1.5 %.

Inflation

Inflation is forecast to fall to around 2.3 % in 2026, moving closer to the UK’s target of 2%. It is projected to settle at around 2.0 % in 2027 and 2028.

These projections suggest inflation easing faster than earlier forecasts. However, global energy price pressures, particularly due to the Middle East conflict, are a significant uncertainty that could push inflation higher than currently modelled.

Labour market outlook

Unemployment is expected to peak around 5.3 % in 2026 before declining over the medium term. While the precise figures vary across scenarios, the OBR anticipates unemployment returning to levels broadly consistent with pre‑pandemic norms by the end of the forecast period.

Public Finances: borrowing, debt & taxation

Public sector net borrowing is projected to shrink significantly over the period:

About 4.3 % of GDP in the current year to 1.8 % by 2029–30.

Borrowing forecasts are roughly £18 billion lower than in the previous (Autumn) forecast.

Public sector net debt is expected to peak and then gradually decline relative to GDP toward the decade’s end. The current budget (day-to-day spending vs receipts) is projected to move into surplus around 2028-29.

Tax receipts

Taxes as a share of GDP are forecast to rise, reaching around 38 % by 2030-31, a historic high for the UK (reflecting prior tax policy decisions). These dynamics reflect a modestly improving fiscal position, but with continued high taxation and debt relative to advanced economies’ averages.

Fiscal headroom and rules

The OBR analysis shows greater “headroom” under the government’s fiscal rules than previously anticipated: Approximately £23.6 bn by 2029-30 against the stability rule - up from about £21.7bn in the November forecast. However, the Spring Forecast does not yet include a formal assessment of progress against fiscal rules (this is done only alongside the main autumn Budget).

External risks

Rising global energy prices due to geopolitical tensions (e.g. the Middle East conflict) are a key downside risk to inflation, growth and interest rate paths. If sustained, they could materially alter inflation expectations and tighten financial conditions beyond current projections.