OECD Downgrades UK Growth Forecast as Energy Prices Bite

The Organisation for Economic Co-operation and Development (OECD) has downgraded its forecast for UK economic growth in 2027 to 1% from a previous estimate of 1.1%. This comes despite a stronger-than-expected performance in 2026, when the economy grew by 1.1%, an upgrade from June's prediction of 0.9%. The OECD attributes this boost to 'solid' domestic demand in the second quarter.

The UK inflation rate is expected to hit 3.1% for the current year, lower than previously forecast at 3.6%, but still one of the highest in the G7. However, the OECD predicts that inflation will slow to 2.6% next year, a shallower drop than previously expected.

The global economic body also noted that recent increases in energy prices and 'higher policy rates' are likely to drag on activity across Europe. The OECD highlighted that interest rates are expected to remain unchanged in the UK in the near term, despite the upgrade in inflation predictions for next year.