Budget 2014: Growth forecasts raised for 2014 and 2015

GDP forecasts

Official forecasts for UK economic growth have been raised for the next two years but cut for later years.

The predictions from the Office for Budget Responsibility (OBR) show that gross domestic product (GDP) is expected to rise by 2.7% in 2014, up from a forecast of 2.4% in December.

The growth forecast for 2015 has been raised from 2.2% to 2.3% and 2016 has been left unchanged at 2.6%.

The 2017 rate fell from 2.7% to 2.6%. The 2018 rate fell from 2.7% to 2.5%.

Chancellor George Osborne announced the forecasts in the Budget speech, in which he said the economy was, "continuing to recover and recovering faster than forecast".

Budget documents

Budget graphic

PDF download Download full Budget documents[2.05MB]

Most computers will open PDF documents automatically, but you may need Adobe Reader

The OBR warned of possible risks that could threaten its growth forecasts. In particular, it said that escalation of the situation in Ukraine "risks lower growth".

But the near-term forecasts being raised while the more distant ones are cut suggests that the OBR thinks the spare capacity in the economy is being used up faster than it expected.

Minutes from the interest rate-setting Monetary Policy Committee meeting at the beginning of the month, which were published earlier on Wednesday, expressed the uncertainty about the amount of spare capacity the economy has.

Borrowing forecasts

The OBR's forecasts for government borrowing were cut from the levels predicted at the time of the Autumn Statement in December.

It is expecting the government to borrow £108bn in the current financial year (which ends at the start of April) having previously predicted £111bn.

Next year's forecast has been cut from £96bn to £95bn.

The surplus prediction for 2018-19 has been raised from £2bn to £5bn.

Mr Osborne said that despite improvements, the country was still borrowing too much and not saving, investing or exporting enough.

He also said that the OBR had predicted that the output of the economy would return later this year to the peak seen before the financial crisis in 2007-08.


According to the Office for Budget Responsibility, the independent group of economists who check the Government's figures, if you add up the tax rises and the tax cuts in this budget, it all adds up to a £5.5 billion giveaway.

The tax cuts include raising the income tax personal allowance and a package of measures to encourage saving.

But such tax cuts were only partly offset by tax rises, the rest of the money will have to come from £5.75 billion in spending cuts, focused on the years from 2016-19, that is after the general election and, as the OBR points out, "for which detailed plans have not yet been set."

It also forecast that earnings would rise faster than prices from this year.

Figures released by the Office for National Statistics earlier on Wednesday showed that the UK's unemployment rate stood at 7.2% in the three months to the end of January.

The OBR predicts that the rate will fall to 6.8% by the end of the year, and will decline gradually to 5.4% by 2018.


Labour leader Ed Miliband said it was strange that the chancellor expected people to be "grateful" that he could achieve a government surplus by 2018, when he had previously promised to manage that by 2014-15.

He also criticised the level of growth in the economy.

"Back in 2010 you told us that at the end of 2014 the economy would have grown by nearly 12%," he said.

"Today the figures say it's been barely half that, and you want the country to be grateful."

The OBR emphasised the uncertainties around its economic forecasts, with concern about the weakness of productivity, real wages and the falling savings ratio.

It also warned that household debt was approaching its pre-crisis levels, and that this may threaten the sustainability of the economy.

And the OBR added that the improvements to the economy were "cyclical rather than structural".

Sarah Hewin, senior economist at Standard Chartered, told the BBC: "The outlook for the UK economy still has a question mark over it," adding that the City was still waiting for news of further deficit-cutting measures.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories


Business Live

    Via Twitter Robert Peston Economics editor

    tweets: "Living standards back to where they were in 2007-8, but mainly for those over 60. & are rising strongly now, says IFS "

    07:17: ITV results

    ITV plans to return £250m to shareholders with a special dividend of 6.25p a share after a bumper 2014, with adjusted pre-tax profits up 23% to £712m and 39% higher at £605m on the pure pre-tax measure. Revenue rose 7% to a shade under £3bn. "ITV is now a high-growth business," says chief executive Adam Crozier.

    07:06: Eurostar sale BBC Radio 4

    Gemma Godfrey, head of investment strategy at Brooks Macdonald Asset Management, tells Today that the £757m the Government got for the Eurostar stake was higher than expected, but questions what the proceeds be used to fund. She believes the cash should be used to fund the next generation of infrastructure that will in turn create profits for the public purse.

    07:00: Greggs results
    Greggs shop

    Greggs results hit the desk. Total sales rose 5.5% to £804m, while like-for-like sales up 4.5% - much better than the 0.8% fall in 2013.

    06:49: ITV results BBC Radio 4
    Downton cast

    ITV reports annual results very soon. Toby Syfret of Enders Analysis has told Today that while channel brands have become less important than they were in the past, the decline is gradual. Programming - such as Downton Abbey - remains the crucial factor. "Good content is going to be the core of whoever is successful in the future," he says.

    Via Twitter Sally Bundock Presenter, World Business Report

    tweets: "Morning. #Ukraine hikes interest rates to 30%. Plus GDP slows in #Australia and an i/v with the boss of #Blackberry. See you soon." That's on World Business Report.

    06:26: Household incomes

    Big discussion about the Institute for Fiscal Studies (IFS) report on household incomes. Whether the average household income is back to levels they were at before the financial downturn struck. One measure, for the over 60s, it is. But for most of the rest of us, it hasn't got there yet. Our story here.

    06:15: India rates

    India has cut its main lending rate by a quarter of a point to 7.5% in a bid to boost economic growth. It is the second time this year that the Reserve Bank of India has cut rates as inflation is running at 5.1% - well under the 8% target - on the back of cheaper oil.

    06:12: Sandwiches Radio 5 live
    UK map of bread names

    Greggs figures are out in an hour or so. The market is looking for 4% growth, earnings are expected to be up 9%. The UK is estimated to spend £9bn a year on sandwiches. Wake Up to Money has been discussing what these are variously called around the country. There's a map illustrating this.

    06:07: Eurostar sale

    The stake is being bought by a Canadian pension fund and a UK asset manager will buy shares for £585m and Eurostar will also hand over £170m to redeem shares which guarantee a dividend. The stake was officially valued last year at £325m.

    06:02: Eurostar sale Radio 5 live

    The sale by the Government of its shares in Eurostar for £750m is under discussion on Wake Up to Money. Gemma Godfrey head of investment strategy at wealth manager Brooks MacDonald tells the programme: "After the debacle we saw when they were selling Royal Mail they had to get it right and the value has come in above expectations."

    06:00: Rebecca Marston Business reporter, BBC News

    Good morning. Strap in and sit back. Today's Business Live page will have all the news, all day. Greggs and ITV results are expected to be early highlights.



  • Elderly manSuicide decline

    Why are fewer elderly people killing themselves in the UK?

  • Petrol pumpPumping up

    Why are petrol prices rising again?

  • Image of George from Tube CrushTube crush

    How London's male commuters set Chinese hearts racing

  • TricycleTreasure trove

    The lost property shop stuffed with diamonds, bikes... and a leg

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.