The UK economy faces a mixed outlook with inflation and unemployment set to rise higher than expected while economic growth weakens from 2026 onwards, according to leaked forecasts by the Office for Budget Responsibility. The forecaster also warned that the tax burden will hit record levels by the end of the current Labour government.
The OBR upgraded its 2025 growth forecast to 1.5%, up from its previous March prediction of 1%. However, growth is expected to slow sharply to 1.4% in 2026, significantly down from the previously projected 1.9%.
Rising inflation pressure
Inflation is set to hit 3.5% this year, higher than the 3.2% previously forecast, according to the OBR. The forecaster also raised its 2026 inflation prediction to 2.5% from 2.1%, though it still expects inflation to reach the Bank of England's 2% target by 2027.
Record tax burden ahead
The tax burden on the economy will strike a record high of 38.3% of GDP by 2030-31, the OBR said. The UK's tax-to-GDP ratio will continue to rise throughout the remainder of the current parliamentary term.
Note: This article was created with Artificial Intelligence (AI).
