Finance23 September, 20262 min read
OECD Predicts UK Growth Slows In 2027 After Upgrading 2026 Outlook
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UK growth for 2026 raised to 1.1% from 0.9%. UK growth for 2027 downgraded to 1.0% from 1.1%.
6 outlets told this the same way.
OECD trims 2027 growth
The Organisation for Economic Co-operation and Development predicted the UK economy would grow by 1% in 2027, down from an earlier forecast of 1.1%. The OECD upgraded its outlook for 2026, raising UK growth from 0.9% to 1.1%. The OECD said inflation was on track to average 3.1% this year, down from its previous prediction of 3.6%.
The OECD forecast inflation would slow to 2.6% next year, pointing to a shallower drop than previously expected after forecasting 2.4% in June. The OECD linked the UK slowdown to the ongoing US-Israel war in Iran and to higher fuel prices that it said would eat into growth in 2027.
Budget balancing act
Chancellor John Healey prepared to deliver his first Budget at the end of October as the OECD downgrade added pressure to balance support for households with defence spending. Prime Minister Andy Burnham made easing the cost of living for households one of his key aims while the government faced pressure to spend more on defence. The OECD said UK growth in 2026 was expected to be higher than it predicted in June after "solid domestic demand growth".
The OECD said higher fuel prices would lower growth in 2027, and it said the effects depended on how long supply disruptions last. Chief Secretary to the Treasury Emma Reynolds said, "Despite unprecedented pressures and conflict in both the Middle East and in Europe, the UK economy is showing strong resilience."
Debt, taxes, and risk
The OECD said global growth was "resilient in many countries" during 2026 despite the impact of the war in Iran, but it also indicated energy-price spikes were likely to cause more inflation in the near term. Kristalina Georgieva warned that global economic shocks were "pushing debt levels up like a staircase not to heaven" and that governments had taken "no action to contain that service cost". The UK was on track to spend more than £100billion this year on debt interest payments, with the country’s overall debt mountain hovering just below £3trillion.
Conservative shadow chancellor Andrew Griffith said the OECD urged countries to "control spending and improve public sector efficiency" and argued the government was trying to find new ways to tax you while paying interest rates on borrowing "which are the highest in the G7". The OECD said risks to the global economy included the war in the Middle East and climate-change related supply shocks, and it said next year global growth was expected to be 0.1% lower.