British budget: growth revised upwards in 2026, but down in 2027

British growth will be better than initially anticipated this year, at 1.2%, but forecasts will deteriorate in 2027, to 1%, announced Wednesday the Minister of Finance of the United Kingdom John Healey during the presentation of the annual budget. The Office for Budget Responsibility (OBR), the British body responsible for monitoring public finances, initially estimated, shortly after the start of the war in the Middle East, that gross domestic product would increase by 1.1% in 2026. It now estimates it at 1.2%.

For 2027, growth is now forecast at just 1%, compared to 1.6% previously predicted by the OBR. “The OBR indicates that the war in the Middle East is a key factor influencing its forecasts today,” Mr Healey told Parliament.

The conflict triggered by Israeli-American strikes against Iran at the end of February caused oil prices to surge and inflation to rise. Analysts therefore believe that the Bank of England should raise its key rates to curb prices, which is generally bad for growth. Borrowing costs never “seen in decades” “Pushed upwards by the conflict in the Middle East, the borrowing costs of governments within the G7 are reaching levels that have not been seen in decades,” recalled the Minister of Finance.

“We will spend 14 billion pounds more in interest on the debt this year,” he said, which reduces the British government's room for maneuver to finance its measures to support the economy. Earlier this month, the IMF also raised its estimate for UK GDP growth for 2026 to 1.3%, from 1% in July, but lowered its forecast for 2027 to 1.2%, from 1.3%. Around 1:35 p.m. GMT, following the British government's announcements, the United Kingdom's ten-year borrowing rate fell slightly by 0.62% and the British pound remained stable.

Machine-translated from French