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Latest figures suggest UK growth ‘significantly overestimated’

The Government’s independent forecasting body, the Office for Budget Responsibility (OBR), has revealed that it failed to anticipate the scale of the economic slowdown in the UK between 2010 and 2012, predicting that growth would be six times stronger than the latest economic figures actually suggest.

The OBR cited high inflation and weak trading as reasons for the overestimates, with the crisis in the eurozone playing a key role in the UK’s poor economic performance.

The impact of austerity measures was another factor which was likely to have contributed to the significant gap between forecast and actual growth, according to the OBR’s forecast evaluation report.

The OBR stated, ‘Along with many forecasters we significantly overestimated economic growth in the past two years. This likely reflected several factors, including the impact of stubborn inflation on real consumer spending, deteriorating export markets on net trade, impaired credit conditions, euro area anxiety and demand uncertainty on business investment. Fiscal consolidation may also have done more to slow growth than we assumed’.

Commenting on the news, the TUC said, 'At the time the Government set out its austerity plans, the OBR thought that the economy would grow by 5.7% from 2010 to mid-2012. Instead it has grown by only 0.9%.

'The economy has massively disappointed and yet the Government is sticking to a fiscal plan based on decent growth forecasts. The Chancellor should think again and start taking action to get the economy moving.’

The OBR is due to release its latest economic forecasts at the time of the Autumn Statement, which will take place on 5 December.