Spring Budget 2024: OBR upgrades UK growth forecasts in boost for Chancellor

The Office for Budget Responsibility (OBR) has upgraded its expectations for UK growth over the five couple of years in a boost to the Chancellor as he delivered the Spring Budget.

The independent fiscal watchdog now expects the UK to grow 0.8 this year, up from a previous estimate of 0.7 per cent. The following year, growth is expected to pick up to 1.9 per cent, up from its November forecast of 1.4 per cent.

“Since 2010 we have grown faster than Germany, France or Italy, the three largest European economies, and according to the IMF we will continue to grow faster than all three of them in the next five years as well,” Jeremy Hunt said.

Although growth was forecast to pick up, Hunt admitted it was still fairly slow. He pointed to the impact of inflation in slowing the economy.

“Tackling inflation, whilst necessary, is also painful. It means higher interest rates and a period of lower growth,” the Chancellor said.

Interest rates stand at a post-financial crisis high of 5.25 per cent, having been hiked from just 0.1 per cent at the end of December 2021. Markets expect the Bank of England to start cutting interest rates this summer.

Growing the economy has been one of Rishi Sunak’s key pledges as the election approaches, but stagnation would be a more apt description of its performance over the previous year.

The UK grew just 0.1 per cent in 2023, falling into a shallow recession in the second half of the year.

However, early indicators suggest growth has picked up in early 2024. “Surveys by Lloyds and Deloitte show business confidence is returning. In other words, because we have turned the corner on inflation, we will soon turn the corner on growth,” he said.

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