Jury 'remains out' over economic impact of budget as OBR slashes 2026 GDP growth forecast
|We think that the jury remains out, for now, with regards to the possible economic impact of the budget.
Admittedly, the OBR’s growth forecast for 2025 was raised to 1.5% (from 1.0%), but the 2026 projection was slashed by 0.5p.p (to 1.4%), while the average growth forecast was downgraded by 0.3 p.p to 1.5%, largely due to lower forecasts for productivity.
Our initial take is that the near-term growth drag due to the tax hikes will probably be modest, but the medium-term impact is up in the air and will be dependent on how the tax hikes impact the not easily quantifiable measures of consumer and business confidence.
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