Economic Growth — Sustained GDP Growth and Productivity
Definition
The government’s growth mission: sustained GDP growth approaching and exceeding 2% annually; real wage growth; increased business investment in high-growth IS-8 sectors; infrastructure as an enabler of productivity.
OBR forecast trajectory
| Year | GDP Growth |
|---|---|
| 2025 | 1.0% (Spring Statement; downgraded from 1.5% in Budget) |
| 2026–2029 | avg 1.5–1.9% |
| 2029-30 | 1.8% |
Note: The October 2024 Budget forecast 1.5% for 2025. The March 2025 Spring Statement downgraded this to 1.0% — a significant decline within 5 months.
Contributing strategies
- industrial-strategy-2025 — IS-8 sectors; £72.33bn investment commitments; 50,000+ jobs
- 10yr-infrastructure-strategy — £725bn infrastructure; productivity through physical capital
- budget-spending-review-2025 — £22.6bn R&D by 2029-30; fiscal rules enabling stability
- planning-infrastructure-act-2025 — +0.2% GDP from housing/planning reform (OBR Spring Statement)
- clean-power-2030 — Clean Energy IS-8 sector; £40bn/year investment 2025-2030
Contributing actions → outcomes logic
| Input | Output | Contribution |
|---|---|---|
| IS-8 investment commitments (£72.33bn) | Business investment in high-growth sectors | GVA, employment, productivity in IS-8 |
| £725bn infrastructure | Physical capital stock | Long-run productivity uplift |
| NPPF/PIA 2025 reforms | +30% housebuilding | +0.2% GDP (OBR); housing as economic driver |
| R&D £22.6bn/yr | Innovation output | Long-run productivity growth |
| Defence spending 2.6% GDP | Military capability; UK defence industrial base | 460,000+ jobs; growth in defence sector |
Delivery status: at-risk
Reasons:
- Growth downgrade: 2025 growth was downgraded from 1.5% to 1.0% between Budget and Spring Statement — early signal of below-expectation performance
- IS investment commitments are announcements: The IS-8 £72.33bn are nominal lifetime values at announcement date, not realised investment — the Q4 data correction (Uniper) illustrated this measurement fragility
- Clean Energy measurement gap: Clean Energy Industries “cannot be proxied at all under the SIC system” — the largest IS-8 sector cannot be tracked via standard economic statistics
- Infrastructure delivery confidence: 15% of GMPP projects (31) are red-rated; £198bn in at-risk whole-life costs
- Fiscal buffer tightening: Stability rule buffer narrowed from £21.7bn to £15.1bn between Budget and Spring Statement; less headroom for growth-supporting investment if growth slips further
Tensions
- delivery-confidence-fiscal-ambition — Infrastructure ambitions assume efficient delivery; NISTA data shows rising red-rated project count and growing costs
- skills-shortage-cross-sector — IS-8 growth depends on skilled workers across sectors competing for the same talent pool