UK’s economy stronger than expected this year, to slow next, says govt

Britain’s economy will grow slightly faster than forecast this year before slowing in 2027, finance minister John Healey said Wednesday as he delivered the government’s annual budget.

“War in the Middle East is a key driver affecting” these forecasts, Healey told parliament.

Gross domestic product (GDP) is estimated to grow by 1.2% in 2026, Healey said, up from a government estimate of 1.1% given shortly after the start of the US-Iran war.

The minister added GDP growth would slow to 1.0% next year after Labour had forecast a 2027 expansion of 1.6% in early March.

The government relies on the Office for Budget Responsibility, an independent fiscal watchdog, for its estimates.

The International Monetary Fund earlier this month also upgraded its 2026 forecast for UK GDP while downgrading its outlook for next year.

It comes after Britain’s economy grew more than initially estimated in the second quarter, by 0.5%, according to official data.

The Bank of England will update its own forecasts for the UK economy on Nov 5, alongside an expected hike to its benchmark interest rate as inflation stays high.