What's happened
The OECD has updated its global forecast, predicting UK growth of 1.1% in 2026 and 1% in 2027, with inflation easing to about 3.1% this year. It cautions that energy shocks from the Middle East war and higher fuel prices could lift inflation and slow growth next year, though the UK shows resilience in domestic demand.
What's behind the headline?
Why this matters
- The OECD’s revision signals that UK growth is still credible this year, but faces a steeper slowdown next year as energy prices stay elevated.
- Inflation is expected to ease, yet remains a key uncertainty for households and policy makers.
- The report underscores the delicate balance the new government faces between supporting growth and restraining debt.
What to watch next
- How the Budget responds to higher energy costs and inflation pressures.
- The trajectory of UK borrowing costs amid global rate volatility.
- Any new policy measures to support households and firms.
How we got here
The OECD’s latest interim outlook places the UK within a broader global context shaped by the Middle East conflict and energy price volatility. It follows a period of improved growth expectations for 2026, driven by solid domestic demand, but flags a slower path ahead as energy costs weigh on activity.
Our analysis
The Mirror reports that the OECD now expects 2026 growth at 1.1% with inflation around 3.1%, while forecasting 2027 growth at 1.0%. BBC Business notes the forecast upgrade for 2026 and a 1% pace for 2027, contingent on energy disruptions. The Guardian highlights the wider risks from the Middle East conflict and El Niño, with the OECD pointing to global growth of 2.9% this year and 3.0% next year, alongside a warning that energy prices could push inflation higher.
Go deeper
- What policies could help shield households from energy-driven inflation?
- How might the Budget adjust borrowing and debt plans in light of the OECD outlook?
- Are there sectors set to outperform if domestic demand stays resilient?
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