Unemployment to jump to 5.3% as UK economy faces slower growth, says OBR

UK gross domestic product (GDP) is expected to grow by 1.1% in 2026, as the OBR cut its previous prediction of 1.4% from last November.

UK unemployment is to worsen further to about 5.3% while economic growth forecasts have also been cut, the UK’s official forecaster has said.

Chancellor Rachel Reeves told MPs in Parliament that the Office for Budget Responsibility said the UK economy would grow more slowly than previously expected in 2026, although growth will pick up in the following years.

UK gross domestic product (GDP) is expected to grow by 1.1% in 2026, as the OBR cut its previous prediction of 1.4% from last November.

However, it also lifted its forecasts for growth for both 2027 and 2028, with the economy to expand by 1.6% in both years.

The Chancellor said she had the “right economic plan” for the UK as she laid out her spring statement on Tuesday.

Ms Reeves also said that unemployment is “set to peak later this year” before reducing over the following years.

The OBR said that the UK unemployment rate is on track to peak at about 5.33% in 2026.

Latest data from the Office for National Statistics (ONS) showed that unemployment lifted to a five-year-high of 5.2% in the three months to December.

The OBR had previously predicted that the jobless rate would increase to 4.9% in 2026.