UK (Parliament Politics Magazine) – The OECD predicts UK growth at just 1% in 2026, citing Donald Trump tariffs, persistent inflation, and limited public spending capacity.
As reported by The Guardian, the Organisation for Economic Co-operation and Development (OECD) warns Britain’s economic expansion will slow in the coming years, as Trump’s tariff war continues to disrupt trade and investment.
OECD report on the UK growth forecasts
According to the OECD, UK growth forecasts have been revised down, with 2025 expected at 1.3% (down from 1.4%) and 2026 lowered to 1% from 1.2%. It also credited tighter Whitehall budgets and rising inflation as factors continuing to downgrade growth outlooks.
The latest growth forecasts declined for nearly every country, including the UK. The Paris-based organisation linked this to uncertainty caused by ongoing US tariff policies impacting global trade.
Global growth is expected to slow to 2.9% this year and next, down from the OECD’s earlier projections of 3.3% in 2024 and 3.1% in 2025.
According to the OECD, ongoing trade tensions are expected to severely impact the economies of the US, Mexico, and Canada.
Its UK report said GDP grew by 0.7% in the opening quarter.
“Momentum is weakening, with business sentiment rapidly deteriorating,”
It stated, adding that
“consumer confidence remains depressed and has declined since the second half of 2024, while retail sales volumes have been volatile.”
The report urged British officials to limit daily expenditure, creating financial space to sustain higher public investment levels.
Álvaro Pereira’s views on the UK’s future amid the tariff war
Álvaro Pereira, chief economist at the OECD, warned about the UK’s capacity to cope with global trade tensions. He said the ongoing tariff war fueled economic uncertainty that the OBR had not included in its forecasts.
He said,
“We hope we have seen the worst of the tariffs and there will be more trade agreements, bringing some certainty to international trade. Our top priority must be to keep markets open for trade.”
Mr Pereira said the OECD expects US tariffs to stay for the next two years. These tariffs include a 25% tax on steel, aluminium, and cars. There is also a 10% tax on all other imports.
He stated,
“In the past few months, we have seen a significant increase in trade barriers as well as in economic and trade policy uncertainty. This sharp rise in uncertainty has negatively impacted business and consumer confidence and is set to hold back trade and investment.”
Mr Pereira said,
“Weakened economic prospects will be felt around the world, with almost no exception. Lower growth and less trade will hit incomes and slow job growth.”
He added,
“Though we are still forecasting that inflation will come down to central bank targets by 2026 in most countries, it will now take longer to reach those targets. In the countries more affected by tariffs, inflation might even rise first before coming down.”
Rachel Reeves’s stance on the OECD’s economic warning
Rachel Reeves defended the UK’s economic strategy, citing recent trade deals with the EU, US, and India as key to cutting business costs, securing jobs, and drawing investment into Britain.
She added,
“The UK was the fastest growing economy in the G7 for the first three months of this year and interest rates have been cut four times, but we know there’s more to do.”
The OECD’s report may put pressure on Chancellor Rachel Reeves. She is expected to face scrutiny next month over her performance. Ms Reeves will reveal the government’s spending priorities for the coming three years in a major review.
Key facts about the OECD
- Membership: The OECD comprises 37 democracies with market-based economies, collaborating on policy standards for sustainable growth 6.
- Economic influence: OECD members account for three-fifths of global GDP and three-quarters of world trade 6.
- Development assistance: OECD countries provide over 90% of global official development assistance 6.
- Transport data: The OECD’s International Transport Forum (ITF) releases annual statistics, including freight transport and road fatality data for member countries