OECD Downgrades UK 2027 Growth Forecast to 1 Per Cent

The Organisation for Economic Co-operation and Development downgraded the United Kingdom's economic growth forecast for 2027 to 1 per cent, down from 1.1 per cent. While the organization slightly upgraded the 2026 outlook to 1.1 per cent due to solid domestic demand, this remains below the 2.2 per cent growth rate projected for the United States.

Economic pressures are driven by high interest rates and soaring energy prices following the collapse of a US-Iran ceasefire in July. The OECD predicts UK inflation will reach 3.1 per cent this year but will decline more slowly than previously expected, reaching 2.6 per cent next year. These forecasts align with S&P Global data showing the UK Flash Composite PMI fell to 51.7, its weakest reading in three months.

Chief Secretary to the Treasury Emma Reynolds defended the economy, noting the UK had the fastest G7 growth in the first half of the year. To support consumers, the government plans to remove VAT from household energy bills in October. Conversely, Shadow Chancellor Andrew Griffith criticized the government's spending and taxation strategies, arguing that the UK's growth rate for 2027 is only a third of the G20 average.

On a global scale, the OECD upgraded overall growth to 2.9 per cent, noting the world economy weathered the conflict with Iran better than feared. However, Secretary General Mathias Cormann warned that the capacity to absorb further shocks is limited as financing costs rise and energy inventories fall.