UK productivity downgrade raises £20-27 billion fiscal shortfall for next five years

The Office for Budget Responsibility (OBR) in the UK revised down long-term productivity growth by 0.3 percentage points, translating into a projected fiscal hole of between £20 billion and £27 billion by 2029-30. The downgrade forces Rachel Reeves’ Treasury into a difficult position given its manifesto pledge to avoid new income tax, VAT or national insurance hikes. The shortfall adds pressure for revenue measures or spending cuts and fuels debate about the UK’s growth model post-Brexit and post-pandemic. Analysts warn that missing growth targets may lead to higher borrowing or structural reforms.