The Office for Budget Responsibility (OBR) has published its forecasts for the UK economy.
Specifically, according to the OBR, the 2025 growth rate has been revised upward to 1.5% (from 1% in March), placing the UK as the second fastest-growing economy in the G7. For 2026, growth is projected at 1.4%, before stabilizing at 1.5% in the following years. The labor market is expected to strengthen further. Total employment is forecast to rise from 34.2 million in 2025 to 35.4 million by 2030, while the unemployment rate is expected to peak at 5% in the first half of 2026 and decline to 4.1% by 2030.
The average annual inflation rate for 2025 is estimated at 3.5% and is expected to gradually fall to 2.5% in 2026, reaching the Bank of England’s target of 2% in Q1 2027. According to the OBR, measures in the latest budget are expected to reduce inflation by up to 0.5 percentage points in Q2 2026 and by an average of 0.3 percentage points for 2026. The OBR also projects that the UK will achieve a primary surplus of 1.4% of GDP in 2030–31, with roughly two-thirds of the adjustment coming from increased tax revenues and the remainder from reduced public spending.
It should be noted that in the second budget of the Labour government for fiscal year 2025/2026, a series of major fiscal interventions are planned, including tax increases through the extension of tax thresholds and limits on allowances, new taxes on income and property, as well as increased spending on research, innovation, and critical public services (health, education, social welfare, transport, etc.).
As part of these measures, a new annual property tax (“mansion tax”) will be introduced from April 2028 for properties valued over £2 million, with progressive charges ranging from £2,500 to £7,500 per year. Additionally, income tax rates on rental income will rise by two percentage points, along with corresponding increases in the taxation of income from savings and dividends.
Moreover, alcohol duty rates will be adjusted from February 2026 according to the Retail Price Index (RPI), alongside a recalibration of the Small Producer Relief scheme for small alcohol producers to align existing tax reliefs with the new, higher rates.
However, in the real estate market, concerns have been raised that the introduction of the “mansion tax” will increase housing costs and intensify rental pressures, particularly in London. Similarly, in the alcoholic beverages sector, the increases in alcohol duties and adjustments to Small Producer Relief are seen as additional burdens, adding to already high operating costs.
The information comes from the Office of Economic and Commercial Affairs in London.