OECD Warns of Slower UK Growth Amid Global Economic Headwinds

The United Kingdom's economic growth is projected to be slower than previously anticipated next year, according to a report from the Organisation for Economic Co-operation and Development (OECD). The international agency has revised its forecast, attributing the slowdown to several global factors, including the ongoing conflict in the Middle East and climate-change related supply shocks.

The OECD now predicts the UK economy will grow by 1% in 2027, a slight reduction from its earlier forecast of 1.1%. However, the agency has upgraded its outlook for 2026, anticipating a growth of 1.1%, up from a previous estimate of 0.9%. This short-term improvement is attributed to solid domestic demand growth.

The report highlights that higher fuel prices, exacerbated by geopolitical tensions in the Middle East, are contributing to inflation and potentially dampening growth. The duration of supply disruptions stemming from these conflicts will significantly influence the extent of the economic impact.

Global growth prospects have also been adjusted downwards, with the OECD forecasting a 0.1% reduction for the upcoming year. Several countries, including Australia, Canada, and the Euro-area, are expected to feel this impact. Beyond geopolitical instability, the OECD also identified weather-related shocks, such as those associated with a strong El Nino, as a potential threat to global food prices and agricultural output.

This economic outlook comes as UK Chancellor John Healey prepares to deliver his first Budget at the end of October.