The latest OECD report presents a cautious outlook for the UK economy, predicting slower growth amidst global uncertainties and domestic fiscal challenges.
The UK’s GDP is projected to grow by 1.3% in 2025 and 1% in 2026, reflecting a slight downward revision.
According to the OECD, trade tensions, particularly U.S. tariffs, are disrupting global supply chains and weakening business confidence.
At the same time, consumer sentiment remains low, and business investment is expected to decline, counteracting the benefits of recent government spending initiatives.
A significant concern highlighted in the report is the UK’s public finances. The OECD warns that the government’s limited fiscal buffers could leave the economy vulnerable to future downturns.
It suggests targeted spending cuts and tax reforms, including a reassessment of council tax bands to reflect updated property valuations.
Debt interest
The OECD has warned that high interest payments on government debt and trade tensions are weighing on the UK’s economic growth. The UK’s fiscal position is described as having ‘very thin’ margins, meaning there is little room for unexpected financial shocks – of which there have been many.
Despite these hurdles, the UK is expected to outperform some major European economies, including France and Germany. However, the UK government face a complex challenge, balancing growth stimulation with fiscal responsibility.
The OECD encourages the government to accelerate infrastructure investments and enhance productivity to ensure long-term economic resilience.
