UK economy to grow slower than earlier forecast, inflation more dogged

The Office for Budget Responsibility (OBR) published updated forecasts for the UK’s economic and fiscal outlook following Hunt’s statement.

The economy will grow slower than the OBR had forecast in March 2023. Inflation is now projected to be more persistent and domestically driven. Higher domestically driven inflation improves the outlook for the public finances, boosting tax revenues by more than it raises public spending.

The chancellor used much of the improvement in public finances to fund business and personal tax cuts.

He said the OBR’s forecast shows that the prime minister’s priorities for the economy are being met and the economic priorities are to halve inflation, grow the economy and reduce debt.

He announced extending the current 75 per cent business rates relief for eligible retail properties for a year in fiscal 2024-25 and freezing the small business rates multiplier for business in that fiscal.

He also extended the duration of tax reliefs available from five to ten years, and announced a package of welfare reforms, including a strengthening of work search requirements for some, designed to raise employment, an official release said.

Headline debt is now predicted to be 94 per cent of the gross domestic product (GDP) by the end of the OBR forecast.

OBR also forecast that the underlying debt will be 91.6 per cent of GDP next year, 92.7 per cent in fiscal 2024-25, 93.2 per cent in 2026-27, before declining in the final two years of the forecast to 92.8 per cent in fiscal 2028-29.

ALCHEMPro News Desk (DS)