Financial Times estimates that the UK government's room for budget manoeuvre has almost halved to £12 billion, equivalent to $15.9 billion. The newspaper links the shift to the consequences of the war in Iran.
In March 2026, the Office for Budget Responsibility (OBR) had put the figure at £23.6 billion, or $31.2 billion. That means the buffer has shrunk by £11.6 billion, equivalent to $15.3 billion.
OBR calculations and forecasts are traditionally used by the government when preparing the budget. FT says one of the main reasons for the decline is higher yields on government bonds.
According to the newspaper, that raises the cost of servicing debt and adds to inflationary pressure. Against that backdrop, FT says UK finance minister John Healy may face the need to raise taxes or cut public spending.
The paper adds that such steps may be needed to fund measures aimed at tackling the cost-of-living crisis, which the new government of Prime Minister Andy Burnham has declared one of its main priorities.
