OECD cuts growth forecast for UK in 2025 to 1.4%

By Aysu Bicer

LONDON (AA) - The Organization for Economic Cooperation and Development (OECD) on Monday revised down its growth forecast for the UK in 2025, reducing it by 0.3 percentage points to 1.4%.

The updated projection, published in the OECD’s latest economic outlook report, also lowered the forecast for 2026 by 0.1 percentage points, to 1.2%.

These adjustments are compared to the previous forecast issued in December.

The OECD report highlighted broader European economic trends, indicating that European economies, including the UK, will experience fewer direct economic effects from tariff measures in the baseline projections.

However, the organization also noted that heightened geopolitical and policy uncertainty is expected to continue to restrain growth across the region.

“European economies will experience fewer direct economic effects from the tariff measures incorporated in the baseline projections, but heightened geopolitical and policy uncertainty is still likely to restrain growth," the OECD said in its report.

"Euro area growth is projected to edge up from 0.7% in 2024 to 1.0% in 2025 and 1.2% in 2026, with growth in the UK projected to be 1.4% in 2025 and 1.2% in 2026,” it added.

Reacting to the forecast, UK Treasury chief Rachel Reeves said: "This report shows the world is changing, and increased global headwinds such as trade uncertainty are being felt across the board."

Despite the forecasted slower growth, Reeves stressed the UK government's ongoing efforts to secure economic stability in the face of global uncertainty.

"A changing world means Britain must change too, and we are delivering a new era of stability, security and renewal, to protect working people and keep our country safe. This means we can better respond to global uncertainty, with the UK forecast to be Europe’s fastest growing G7 economy over the coming years – second only to the US," she added.