OECD Raises 2026 UK Growth Forecast Amid Iran War

The Organisation for Economic Co-operation and Development revised its 2026 growth forecast for the United Kingdom upward to 0.9%, from a previous prediction of 0.7%. Despite the increase, this represents a slowdown from the 1.4% growth seen last year. The organization lowered its 2027 outlook to 1.1% and projected that UK unemployment will rise to 5.5%, the largest increase among G7 nations.

Economic instability is primarily attributed to the US-Iran war, which has disrupted energy flows through the Strait of Hormuz and increased costs for consumers. Global growth is expected to slow to 2.8% this year from 3.4% in 2025. The OECD warned that persistent disruptions could trigger global recessions and urged the UK to maintain fiscal discipline and structural reforms to rebuild economic buffers.

Chancellor of the Exchequer Rachel Reeves defended the government's economic strategy, noting that current forecasts show lower inflation and higher growth than previously anticipated. The OECD projects UK inflation will rise to 3.7% this year before falling to 2.4% next year.