UK OBR forecasts GDP growth slowing from 1.25% in 2026 to 1.0% in 2027, while CPI inflation is expected to reach 3.5% in 2027 (vs prev. 2% seen in March)

Borrowing could be GBP 17bln above its central forecast in 2027/28 if energy prices reach a higher and more sustained peak. Significantly better or worse outcomes for the public finances and economy are broadly equally likely. The rise in interest rates and increase in the inflation forecast leaves pre-measures borrowing an average of GBP 11bln per year higher than in March. 1ppt change in interest rates could increase or reduce government debt interest costs by GBP 16bln. Council housebuilding programme could cost GBP 3-4bln/yr, in addition. The ’Your First Home‘ scheme could marginally raise house prices by stimulating housing demand. If fuel duty freeze continued, then the headroom would be GBP 10.2bln. Performance vs the fiscal target (i.e. headroom/margin) GBP 14.5bln of headroom against surplus by 2029-30 (moved to the 3rd yr of the forecast); 56% chance of happening (prev. 59%) ex-fuel duty rises, GBP 10.2bln "These margins against the fiscal targets are very small compared to the inherent risk and uncertainty around any medium-term fiscal forecast" "With the shorter horizon to the target year compared to last November, a smaller margin is required to have the same chance of meeting the rules. Despite this, the probability has decreased overall because the reduction in the margin more than offsets the effect of the shorter horizon."