What's happened
The Office for Budget Responsibility (OBR) has revised its UK economic forecasts, predicting slower growth of 1.1% in 2026 due to lower net migration, but expects stronger growth of 1.6% in 2027 and 2028. Unemployment is also forecast to peak later this year before declining.
What's behind the headline?
The downward revision of the 2026 GDP growth forecast to 1.1% signals a cautious outlook, primarily driven by demographic shifts and migration trends. Slower population growth reduces the supply of labor, marginally lowering potential output by 0.25 percentage points by 2030. However, the forecasted rebound in growth for 2027 and 2028 suggests resilience, assuming migration policies stabilize and productivity improves. The delayed peak in unemployment to later this year indicates a gradual adjustment in the labor market, with a decline expected from 2027 onward. These forecasts underscore the importance of migration policy in shaping economic prospects, with significant uncertainties around how proposed policy changes will influence productivity and living standards. The overall outlook remains cautious but optimistic about recovery in subsequent years, contingent on policy stability and economic reforms.
What the papers say
The Independent reports that the OBR's revised forecast reflects increased out-migration of UK nationals, leading to a lower population and marginally reduced potential output. Sky News highlights the slower growth in 2026 but notes the forecasted acceleration in 2027 and 2028, with unemployment peaking later this year before falling. Both sources emphasize the impact of migration trends and policy decisions on the UK's economic trajectory, with The Independent stressing the uncertainties around future policy changes and their effects on productivity and living standards. The coverage illustrates a consensus that demographic shifts are a key driver of the revised forecasts, and that the government’s migration policies will significantly influence the economic outlook in the coming years.
How we got here
The OBR's forecast adjustments follow updated migration data indicating more UK nationals leaving the country, which impacts the population and workforce size. These changes reflect ongoing government policies aimed at reducing net migration, influencing economic growth and productivity projections. The forecasts also exclude some proposed policy changes still under review.
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Rachel Jane Reeves is a British Labour Party politician serving as Shadow Chancellor of the Duchy of Lancaster and Shadow Minister for the Cabinet Office since 2020. She has been the Member of Parliament for Leeds West since 2010.
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The Office for Budget Responsibility is a non-departmental public body funded by the UK Treasury, that the UK government established to provide independent economic forecasts and independent analysis of the public finances.