The Office for Budget Responsibility lowered Britain’s productivity forecasts from 1.3% to 1% in the latest Budget, a downgrade which could cut £16bn from the economy by 2030.
Productivity growth for 2025 has been downgraded by 0.3 percentage points from the OBR’s March report to 1.0 per cent, implying slower supply-side expansion and weaker revenue generation. Despite that, the OBR expects economic growth in 2025 to exceed previous projections, rising from 1.0 per cent to 1.5 per cent.
OBR chair Richard Hughes said growth in 2026 is now expected to reach 1.4 per cent, down from 1.9 per cent forecast in March. Average real GDP growth between 2026 and 2029 has also been revised down to 1.5 per cent from 1.8 per cent.
The OBR has attributed these to sluggish productivity rates, driven by weak business investment and a lack of innovation.
The forecast revision is a blow to Reeves’ efforts to convince the OBR that the economy is turning the corner. She has spent several months campaigning to investors that Britain is worthy of their capital. Investment into Britain’s businesses and capital markets will help drive up innovation and increase in high skilled jobs that bring in substantial tax revenue, according to a policy paper published by the London School of Economics.
Reeves vowed to ‘…beat the forecasts again, by boosting trade, not blocking it; by increasing investment, not cutting it.”
