The Office for Budget Responsibility has upgraded its UK growth forecast for 2026 to 1.2 per cent while warning that inflation will peak at 3.8 per cent in early 2027 before the economy picks up pace later in the Parliament.
Published alongside the Budget on 28 October 2026, the OBR’s Economic and Fiscal Outlook puts 2026 GDP growth at 1.2 per cent — 0.1 percentage points higher than the March 2026 forecast. The upgrade reflects a higher starting level of potential output and stronger investment growth than the OBR assumed earlier in the year.
The figures show a sharper slowdown ahead. Growth is forecast to drop to 1.0 per cent in 2027 as higher energy prices squeeze households and businesses and elevated interest rates weigh on the broader economy. That’s the weakest year in the entire forecast window — after which the OBR expects a gradual recovery to 1.6 per cent in 2028, 1.8 per cent in 2029, 1.7 per cent in 2030 and 1.6 per cent in 2031.
Inflation is the sharpest near-term concern. The OBR projects it will peak at 3.8 per cent in the first quarter of 2027 — nearly double the Bank of England’s 2 per cent target — before returning to that target by the third quarter of 2028. The OBR flags that this outlook is sensitive to wholesale oil and gas prices, meaning the peak could shift if energy markets move.
Employment is forecast to grow steadily throughout the period, rising from 34.4 million in 2026 to 35.4 million in 2031. GDP per person is projected to grow by 5.9 per cent over the Parliament. Yet despite the near-term upgrade, the OBR states that GDP is broadly unchanged at the forecast horizon compared with March 2026 — so the revision is more a shift in timing than a fundamental reassessment of the economy’s longer-run trajectory.
The forecast was commissioned by the Chancellor on 31 July 2026 under the OBR’s independent remit established by the Budget Responsibility and National Audit Act 2011.
Source: @OBR_UK
OBR raises 2026 growth forecast but warns of inflation spike ahead Quiz
5 questions