The pound fell as the UK’s spending watchdog downgraded its forecast for economic growth this year, as chancellor Rachel Reeves delivered the spring statement.
Sterling fell 0.4% to $1.2892 against the dollar (GBPUSD=X), after the Office for Budget Responsibility (OBR) said it now expected UK gross domestic product (GDP) to grow by 1% in 2025.
In the OBR’s October economic and fiscal outlook, the spending watchdog said it had expected the UK’s economy to grow by 2% in 2025.
At close: 28 March at 21:29:26 GMT
“I am not satisfied with these numbers and that is why we on this side of the House are serious about taking the action needed to grow our economy,” Reeves said in her speech.
“Backing the builders not the blockers with a third runway at Heathrow airport and the planning and infrastructure bill, increasing investment with reforms to our pensions systems and a new national wealth fund, and tearing down regulatory barriers in every sector of our economy.
“That is a serious plan for growth, that is a serious plan to improve living standards, that is a serious plan to renew our country.”
Read more: Spring statement LIVE: Rachel Reeves delivers key speech as OBR cuts UK growth forecast in half
In the spring statement, Reeves emphasised that global uncertainty had increased since she delivered the autumn budget in October.
While the OBR halved its economic growth estimate for 2025, it upgraded its GDP forecast for the following four years. The OBR forecast that the economy would grow by 1.9% in 2026, from a previous estimate of 1.8%.
“As the previous government learned to their detriment, there are no shortcuts to economic growth,” said Reeves. “It will take long-term decisions, it will taker hard yards. It will take time for the reforms that we are introducing to be felt in the everyday economy.
“It is right that the Office for Budget Responsibility consider the evidence and look carefully at measures before recognising the growth impact in their forecast.”
Reeves said that the OBR had concluded that its planning reforms would “permanently increase the level of real GDP by 0.2% in 2029/30”, working out to an additional £6.8bn for the economy. She said that the OBR forecast that this would increase the level of GDP by 0.4% within 10 years, adding £15.1bn to the economy.
“That is the biggest positive growth that the OBR have ever reflected in their forecast for a policy with no fiscal cost,” she said. “And taken together with our plans to increase capital spending that we set out in the budget last year, this government’s policies will increase the level of real GDP by 0.6% in the next 10 years.”
