UK economy will grow by less than expected next year, OECD says
Higher energy prices due to the conflict in the Middle East and climate change could hit growth.
UK economy set to grow less than expected next year, OECD says
The UK is expected to grow by less than previously forecast next year amid the continuing US-Israel war in Iran, an international agency has said.
The Organisation for Economic Co-operation and Development (OECD) said the prolonged conflict is affecting the economic outlook of many countries.
According to the OECD, the downgrade to the UK’s growth outlook is modest. It now expects the economy to expand by 1% in 2027, down from an earlier forecast of 1.1%.
The agency also raised its forecast for UK growth in 2026, lifting it from 0.9% to 1.1% for the year.
The forecast comes as Chancellor John Healey prepares to present his first Budget at the end of October.
In the near term, UK growth in 2026 is expected to be stronger than the OECD predicted in June, helped by “solid domestic demand growth”.
However, growth in 2027 is expected to be weaker than previously forecast as higher fuel prices weigh on expansion. The impact will depend on how long supply disruptions continue, it said.
The OECD said risks to the global economy include the war in the Middle East and climate-change-related supply shocks.
Global growth next year is also expected to be 0.1% lower, with Australia, Canada and the Euro-area among the countries affected.
Conflict in the Middle East has helped drive up oil and gas prices worldwide, increasing inflation in countries including the UK.
It added that weather-related shocks, including those linked to a strong El Nino, could hurt farmers and push food prices higher.