OBR to chop UK financial progress forecast in half in blow to Starmer and Reeves forward of spring assertion | EUROtoday

The UK’s official financial progress forecast for this yr will likely be lower in half subsequent week in a blow to Sir Keir Starmer and Rachel Reeves, it has emerged.

As the chancellor prepares to unveil a swathe of spending cuts at subsequent week’s mini-Budget, the federal government’s spending watchdog is ready to decrease the anticipated progress fee for 2025 from 2 per cent to about 1 per cent.

The Office for Budget Responsibility’s (OBR) downgrade is a serious blow for the federal government, with Sir Keir having repeatedly mentioned financial progress is his prime precedence.

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Ms Reeves will use her spring assertion speech on Wednesday to aim in charge the steep drop on the worsening world financial outlook as Donald Trump imposes strict tariffs on items imported to the US, The Daily Telegraph reported.

But the downgrade may power Ms Reeves to show to contemporary tax hikes or steeper than anticipated spending cuts to fulfill her self-imposed borrowing guidelines.

And it got here as official figures confirmed authorities borrowing soared above forecasts final month resulting from sharp will increase in public spending.

The Office for National Statistics (ONS) mentioned public sector internet borrowing was £10.7bn in February – £100m greater than the identical month final yr and the fourth-highest February on report.

Capital Economics UK economist Alex Kerr mentioned: “Although they will have no impact on the fiscal update next week, the significant overshoot in borrowing in February highlights the chancellor’s tight fiscal backdrop. The OBR will still most likely conclude that the chancellor’s headroom against her fiscal rules has been wiped out.

“We expect her to announce further non-defence spending cuts, on top of the welfare cuts already unveiled earlier this week.”

Since the overall election in July, the financial system has been stagnant, with critics rounding on Ms Reeves for her £40bn tax-hiking October Budget.

After figures displaying the financial system really shrank in January, the Conservatives branded the social gathering “growth killers”.

With the shortage of financial progress including to the strain on the general public funds, Ms Reeves will reportedly announce plans to chop Whitehall budgets by billions of kilos greater than beforehand anticipated, with some departments dealing with cuts of as much as 7 per cent over the subsequent 4 years.

The anticipated cuts come simply days after work and pensions secretary Liz Kendall unveiled £5bn cuts to the welfare system, with rising fears Britain is dealing with a return to a Tory-like austerity agenda.

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Chief secretary to the Treasury Darren Jones insisted on Thursday it could be “factually incorrect” to say Labour is implementing a contemporary spherical of austerity.

“The numbers will be published next Wednesday, but as you saw at the Budget last year, we are increasing public spending, and we’ve increased it quite a lot,” Mr Jones mentioned.

Austerity is a time period for presidency coverage designed to manage nationwide debt, which was adopted in Britain following the 2008 monetary disaster and led to main cuts to public companies.

News of the expansion forecast being slashed comes a day after the Bank of England held rates of interest at 4.5 per cent amid mounting world uncertainty and rising commerce tensions sparked by President Trump.

Interest charges is predicted to fall additional this yr, however solely two extra cuts are anticipated in 2025 because the BoE tries to maintain inflation underneath management, whereas prices rise for companies and the broader financial outlook stays unsure.

While the UK has but to implement any retaliatory tariffs on the US, an escalating commerce warfare may considerably hit financial progress and push up costs.