OECD Predicts UK Economic Growth Slowdown After Strong 2026 Performance

The Organisation for Economic Co-operation and Development (OECD) has released new forecasts indicating that UK economic growth will slow next year, despite a stronger-than-expected performance in 2026. The OECD reported that the UK economy is set to have grown by 1.1% this year, an upgrade from their previous estimate of 0.9%. This growth is attributed to 'solid' domestic demand in the second quarter and government support measures, such as removing VAT from household energy bills.

However, growth is expected to be weaker than last year's 1.4% and will dip slightly next year, according to the OECD. The organisation also predicts that UK inflation will be below previous forecasts this year but will take longer than expected to fall back to target levels.

The OECD pointed out that recent rises in energy prices linked to the Middle East conflict are likely to cause more inflation in the near term before gradually easing next year. Global growth is 'resilient in many countries' despite the impact of the war, but energy price increases will have a dragging effect on activity across Europe.

Treasury Minister Emma Reynolds stated that 'despite unprecedented pressures and conflict...the UK economy is showing strong resilience.' The OECD predicts UK inflation to slow to 2.6% next year, which is a shallower drop than previously expected.