OECD slashes UK growth forecast amid trade war
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The news: The Organisation for Economic Co-operation and Development (OECD) cut its forecast for UK growth as economists warn that the escalating trade war and stubborn inflation will continue to weigh on the country’s economy.
The numbers: The OECD scaled back expectations for UK growth to 1.4% in 2025 and 1.2% in 2026, down from 1.7% and 1.3% respectively in its previous predictions.
The Paris-based agency also cut back global growth predictions, projecting that global growth will drop from 3.2% in 2024 to 3.1% in 2025 and just 3% in 2026.
The context: The new figures from the OECD factor in 25% trade tariffs imposed by US President Donald Trump on Canada and Mexico, the 20% tariff on China and steel and aluminium taxes that affect countries including the UK.
In its report published Monday, the OECD said that the US tariffs will act as a drag on global activity, adding to trade costs and increasing the cost of consumer goods. The US will also take a hit from Trump’s trade policies, with the OECD trimming its growth forecast for the economy from 2.4% to 2.2% this year, and from 2.1% to 1.6% in 2026.
The group warned that “further fragmentation of the global economy is a key concern. Higher and broader increases in trade barriers would hit growth around the world and add to inflation.”
Across the G20, the OECD said that headline inflation is now projected to fall from 5.3% in 2024, to 3.8% in 2025 and 3.2% in 2026, and that core inflation would still remain above central bank inflation targets at the end of the projection period in over half of the advanced G20 economies, including the US.
The OECD says growth in both Korea and Australia is projected to hold up in 2025, but will be weaker than previously expected.
What they said: The report reads: “Governments need to find ways of addressing their concerns together within the global trading system to avoid a significant ratcheting up of retaliatory trade barriers between countries… a broad‑based further increase in trade restrictions would have significant negative impacts on living standards.”
The sources: OECD March Economic Outlook, Financial Times
