LONDON, March 3 (Reuters) – British finance minister Rachel Reeves delivered a budget update on Tuesday that showed that inflation and borrowing would be lower than expected by Britain’s fiscal watchdog, although its economic growth projection was also cut.
Delivered against the backdrop of turmoil in the Middle East and markets on the slide, here are some of the main points from her speech to parliament:
UK ECONOMY TO GROW BY LESS THAN PREVIOUSLY FORECAST
Britain’s economy is forecast to grow by 1.1% this year, Reeves said, citing the latest projections from the Office for Budget Responsibility.
The new prediction was weaker than a forecast of 1.4% growth for 2026 in the OBR’s previous outlook published in November, when Reeves delivered her second annual budget.
However expectations were nudged higher for the years ahead. It said it expects economic output to expand by 1.6% in 2027 and 2028, and by 1.5% in 2029 and 2030. That compared with a previous forecast of 1.5% each year in 2027, 2028, 2029 and 2030.
FISCAL HEADROOM HAS INCREASED
Britain’s government has a bigger margin for error for meeting its main fiscal target at the end of the decade, Reeves said on Tuesday, citing new forecasts from the OBR.
The government’s expected tax revenues were due to stand at 23.6 billion pounds ($31.4 billion) above projected day-to-day spending in the 2029/30 fiscal year, Reeves said.
UK INFLATION SEEN AT 2.3% IN 2026
British consumer price inflation is set to average 2.3% in 2026, according to estimates from the OBR, Reeves said.
In November, when Reeves announced a full budget, the OBR said it expected inflation of 2.5% this year.
UNEMPLOYMENT TO PEAK THIS YEAR
Reeves said that according to the OBR’s forecasts, UK unemployment is set to peak later this year and then fall in every year of the forecast period, ending the parliament at 4.1% – lower than it was at the start.
She plans to set out more reforms in the coming weeks to tackle youth unemployment.
CLOSER EU TRADE TIES
Reeves said she would set out proposals for closer trade ties with the European Union in a speech in the coming weeks.
(Reporting by UK bureau; Editing by Hugh Lawson)
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