OBR report confirms UK in recession

The Office for Budget Responsibility (OBR) has confirmed the country is currently in a recession and will not recover until 2024.

The report, released on the same day as Chancellor Jeremy Hunt's Autumn Statement, explains that inflation and a squeeze on household incomes has dropped consumer spending, tipping the economy into recession.

Economic outlook

GDP is expected to drop by 2% from the third quarter of 2022 to the end of 2023 - in 2023 alone, the economy will contract by 1.4%, according to the OBR.

However, the contraction of the economy is expected to be less dramatic than those during the pandemic or the 2008 financial crisis.

The economy grew in 2022 by 4.2%, meanwhile, but is only expected to return to its pre-pandemic size by late 2024.

According to the OBR, inflation peaked in September 2022 at 11.1% and will drop "sharply" in 2023 and drop below zero in the middle of the decade before reaching the Bank of England's target of 2% in 2027.

But the effects of inflation will be felt through a 7% drop in real wages and living standards in the two financial years to 2023/24, wiping out the last eight years of growth.

Public borrowing

According to the OBR, "fiscal policy has been characterised by a high degree of uncertainty since March, first increasing and then reducing the medium-term deficit".

Across five major fiscal policy statements and three successive Governments, there has been a seesaw of policy, from support with energy bills increasing the deficit, fiscal loosening in Kwarteng's ‘mini-budget', and a fiscal tightening in the Autumn Statement.

As a result, borrowing has risen relative to the OBR's March 2022 forecast by £62.4bn in 2022/23 and £39.8bn in 2023/24.

The report reads:

"Policy decisions then reduce borrowing from 2024-25 onwards - when the economy is recovering and unemployment falling - by amounts rising to £39.4 billion in 2027-28.

"From 2024-25 onwards, the Autumn Statement lowers borrowing by progressively larger amounts rising to £61.7 billion (2.1%t of GDP) in 2027-28.

"Net tax rises account for half of this tightening (£31.0 billion), with £19.4 billion coming from cuts to current departmental spending and £11.8 billion from cuts to departmental capital spending."

In his recent Autumn Statement, Chancellor Jeremy Hunt announced a fiscal rule that states debt should be on course to fall as a share of national income in five years' time and to limit the deficit by 3% of GDP at the same horizon.


Many industry professionals believe the outlook over the next couple of years is grim, especially with the additional forecasting from the OBR.

Paul Johnson, director of the Institute of Financial Studies (IFS), said:

"The swing over a couple of months from Kwasi Kwarteng's fiscal loosening to a big fiscal tightening is a belated recognition of some harsh fiscal realities.

"The sharp and sustained increase in how much we now expect to spend on debt interest, in particular, has forced difficult decisions elsewhere.

"At around £100 billion a year by the end of the forecast period, spending on debt interest will be higher than spending on any single public service bar the NHS."

Martin Wheatcroft, external advisor on public finances for the Institute of Chartered Accountants in England and Wales, said:

"The legacy of the huge amounts borrowed over the course of a series of fiscal crises has severely weakened the public finances, at the same time as spending on public services has been constrained by policy decisions, and economic growth has been weak.

"The Chancellor will be hoping that the economy performs at, or even better than, the OBR forecasts, but he will be acutely aware that this is not a given and the public finances could easily be pushed off course by events."

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