LONDON (Reuters) – Britain's budget watchdog is expected to cut a key productivity growth forecast by a bigger-than-expected 0.3 percentage point, the Financial Times reported, signaling further pressure on the government ahead of next month's budget.
The Financial Times report, which cited people familiar with the matter, added on Monday that analysts believe the cut by the Office for Budget Responsibility could mean a shortfall of more than 20 billion pounds ($26.84 billion) in public finances.
The OBR has described the outlook for trend productivity – measured as output per hour worked – as central to its economic projections, which in turn underpin budget estimates. It called it “one of the most important and uncertain forecasts” in its economic and budget outlook in March.
A Treasury spokesperson declined to comment on speculation ahead of the OBR's forecast, which will be published on November 26, when Chancellor of the Exchequer Rachel Reeves will present the government's budget. The OBR did not immediately respond to a Reuters request for comment.
Reeves has acknowledged the expected reduction in the OBR, saying it relates to the period before Labor came to power.
The cut would increase fiscal pressure ahead of the budget, when it is expected to raise tens of billions of pounds in taxes to stay on track to meet its budget targets and avoid a loss of confidence in the bond market.
In the government's first budget since coming to power last year, Reeves announced a major increase in public investment in infrastructure and energy, financed by higher borrowing and taxes on employers.
($1 = 0.7451 pounds)
(Reporting by Mrinmay Dey in Bengaluru and Alistair Smout in London; Writing by Muvija M; Editing by Sharon Singleton and Chizu Nomiyama)
