Chancellor hit with another blow as the OECD downgrades UK growth

The Organisation of Economic Cooperation and Development (OECD) has cut global growth projections for this year and next.

The OECD warned the Chancellor that the UK’s economic forecasts have been downgraded over the next two years amid the US President Donald Trump’s trade tensions following his tariffs war.

OECD economists warned the global economic outlook is “becoming increasingly challenging” and the UK economy is forecast to grow 1.3% for 2025 instead of the last forecast of 1.4%.

The influential organisation has lowered their prediction for 2026 from 1.2% to 1% due to “heightened trade tensions, tighter financial conditions, and elevated uncertainty.”

The report added, “Inflationary pressures will initially linger, due to higher import prices and robust wage growth in 2025, but subside over 2026, as spare capacity emerges and the labour market loosens.”

The OECD said that “momentum is weakening” as the UK economy only grew by 0.7% in the first quarter and business sentiment is flatlining and consumer confidence is “depressed.”

The OECD has also warned the Chancellor she could break her Budget rules and she will be left with “very thin fiscal buffers.”

The have urged Rachel Reeves to boost tax revenues as the UK is facing a “substantial downside risks to growth.”

The Paris based organisation said, “Currently, very thin fiscal buffers could be insufficient to provide adequate support without breaching the fiscal rules in the event of renewed adverse shocks.”

They warned “the state of the public finances is a significant downside risk to the outlook if the fiscal rules are to be met.”