OBR forecasts 1% growth in 2027 as inflation stays above target

Verified facts

The OBR's October forecast, published alongside the Budget on 28 October, puts annual real GDP growth at 1.2% in 2026 and 1.0% in 2027. Its detailed economy table forecasts average CPI inflation of 3.1% in 2026 and 3.4% in 2027. These are calendar-year forecasts, not monthly inflation readings.

The same table forecasts household real disposable income falling 0.6% in 2026 and rising 0.2% in 2027. Separately, the Debt Management Office increased planned gross gilt sales for the 2026-27 financial year by £4.4bn to £250.6bn. Its revised net financing requirement is £258.6bn, with a planned £8bn net contribution from Treasury bills. Gross gilt sales and net borrowing are different measures.

Apolifina analysis

For UK investors, a weak growth forecast combined with elevated inflation makes it important to distinguish business revenue growth from an improvement in purchasing power. Company-specific pricing, costs and overseas earnings may produce results very different from the national forecast. The financing update also matters to bond investors, but it is not a prediction of the next gilt yield. Prices reflect demand, maturity, inflation expectations and the path markets expect interest rates to take. A larger issuance programme alone does not establish a certain loss or gain on a gilt fund. Cash flows from an individual bond and the changing market value of a bond fund should not be treated as interchangeable.

Uncertainty and risk

The forecasts depend on assumptions about energy prices, global conditions and policy. They are not outturn data or a Bank of England interest-rate decision. Gilt prices can fall; longer-duration holdings can be particularly sensitive to yield changes. No personal investment recommendation is made.

Primary sources

Source released 28 October 2026. Published 29 October 2026; catch-up coverage of the original release.

Continue reading: Related coverage · Related coverage