The OBR's Spring forecast, published on 3 March 2026, paints a cautious picture of the UK economy as public sector debt nears double the advanced-economy average after tripling over two decades.

Growth Downgrade Signals Slower Recovery

Central to the update is the reduced 2026 growth projection of 1.1%, with forecasts holding at 1.6% for 2027 and 2028, then 1.5% for 2029 and 2030. This downgrade reflects weaker momentum amid fiscal constraints and global uncertainties, including renewed trade policy risks from US tariff decisions.

Chancellor Rachel Reeves' Spring Statement was described as a 'fiscal non-event', delivering no policy changes amid a backdrop of mixed economic signals, including a by-election loss for the government.

Fiscal Pressures Mount with Record Tax Burden

Public sector net borrowing forecasts have been revised slightly lower, with £6 billion less expected this year and reductions up to £8 billion by 2030-31, driven by stronger-than-expected tax receipts from surging equity prices. However, policy measures since November, such as £1.4 billion in local authority support and £4 billion annual increases for special educational needs, will raise borrowing by £4.3 billion yearly from next year.

• National Accounts taxes forecast to rise from 36% of GDP this year to 38% by forecast end, a historical high and 6% above pre-pandemic levels.
• Personal taxes to account for half the increase, amid nominal wage growth slowing to 3.5% in 2026.
• Equity price rises boost capital taxes, corporation tax, and income tax receipts, though a potential correction poses downside risks.

Inflation Easing Amid Rate Cut Expectations

Separate UK Finance analysis highlights disinflation drivers, including the autumn Budget's energy bills package removing green levies, expected to shave 0.4 percentage points off CPI in Q2 2026. Cooling inflation to around 3% has fuelled market bets on a Bank of England rate cut in March or April, with Bank Rate projected to fall from 3.75% to 3.3% by late 2026 before rising to 4.0% by 2030.

January's record £30.4 billion budget surplus, propelled by robust income and capital gains tax, has eased debt sustainability concerns despite taxpayer frustration over the burden.

Business investment remains cautious per ONS surveys, hampered by economic uncertainty and cost pressures, even as SME borrowing ticks up and confidence improves slightly.