UK growth forecast DOWNGRADED by OBR in assessment of Rachel Reeves's fiscal plans

Furthermore, the OBR forecasts GDP growth will jump to 1.6 per cent in 2027, up from last year's forecasts, and remain at this level the following year.

As well as this, the UK's fiscal watchdog has projected borrowing will ease by nearly £18billion compared to the autumn, with public sector net borrowing expected to fall from 4.3 per cent this year to 3.6 per cent next year, before hitting 1.8 per cent in 2029-30.

Speaking to the House of Commons, the Chancellor provided a fiscal update on the state of the economy, but analysts are concerned that today's outlook is outdated in the wake of the US-Iran war in the Middle East.

She said: "Today, the new forecasts from the OBR confirm that our plan is the right one: inflation is down, borrowing is down, living standards are up, and the economy is growing.

"This Government has restored economic stability. The previous Government let inflation skyrocket to over 11 per cent, stoked interest rates to 15-year highs, and delivered the first Parliament on record where people were poorer at the end than they were at the start.

"I recognise the impact that had on families. We promised change at the election, and I understand the responsibility on me to deliver that change. I know that the question people will ask themselves at the next general election is this: are me and my family better off? I am determined that the answer will be yes."

Notably, the OBR highlighted that GDP per capita is set to grow more than was expected in their last assessment, with growth of 5.6 per cent expected over this Parliament.

According to the Chancellor, Britons are forecast to be over £1,000 a year better off by the next General Election in 2029, when taking inflation into account.

President Donald Trump and Israel's decision to launch a military strike on the Islamic Republic has seen the Ayatollah Khamenei killed, the Strait of Hormuz shipping route closed, and key gas and oil rigs in the region targeted.

Energy prices have surged in response, with economists warning inflation is likely to spike as a result.

Latest official data found UK public sector net borrowing in the financial year to January 2026 came to £112.1billion, around £14.6 billion less than in the same period a year earlier.

January itself delivered a record £30.4billion surplus, the highest for that month since records began, driven by strong receipts and beating the OBR's prior forecast by around £6.3billion

Based on the latest OBR report, UK public sector debt as a share of GDP has nearly tripled over this period with the cost of servicing this debt increasing sharply from £39billion in 2019-20 to £106billion in 2024-25.

Furthermore, the UK Government's 10-year bond yields remain the highest in the G7, and fourth-highest among the advanced economies.

Susannah Streeter, Chief Investment Strategist, Wealth Club, said: "The Chancellor was trying to project a 'keep calm and carry on' message, but market turmoil continued during her speech, with UK borrowing costs having shot up and London’s FTSE 100 deep in the red, staying around 2.6 per cent lower.

"Although there was a nod to the current turbulence, the forecasts don’t take into account the rapidly developing situation in the Middle East.

"So even though Rachel Reeves championed forecasts of a further fall in inflation, there’s a clear and present danger of the price spiral taking off again due to escalating conflict with Iran."