The UK economy is poised for a remarkable turnaround, with the Organisation for Economic Co-operation and Development (OECD) predicting it will become the fastest-growing nation in the G7 next year. This bullish forecast represents a significant upgrade from previous assessments and offers a welcome boost to the government.
In its latest economic outlook, the Paris-based organisation stated that UK growth is expected to accelerate to 1% in 2025, surpassing all other G7 members, including the United States, Germany, and Japan. This marks a substantial improvement from the OECD's previous forecast in February, which projected growth of just 0.7%.
Inflation Target Within Reach
A key driver behind the improved outlook is the expectation that inflation will finally fall back to the Bank of England's 2% target. The OECD report indicates that consumer prices index (CPI) inflation is likely to hit this target within the next few months, providing relief for households and businesses alike.
Chancellor Jeremy Hunt was quick to welcome the news, stating it was "proof that the difficult decisions we have taken are paying off". He emphasised the government's focus on controlling inflation as the prerequisite for sustainable growth.
Political Battle Over Economic Management
The positive forecast has immediately ignited a political debate. Work and Pensions Secretary Mel Stride seized on the report, telling Sky News that it was "very encouraging" and demonstrated the economy was "moving in the right direction."
However, Shadow Chancellor Rachel Reeves offered a more cautious interpretation. While acknowledging the upgrade was better than the alternative, she argued that "the facts are that we are forecast to be the worst-performing economy in the G7 this year". She attributed the improved 2025 forecast to the economy "catching up from a very low base" after years of stagnation.
The OECD itself cautioned that growth remains "modest" by historical standards and highlighted ongoing challenges. The report suggested that interest rate cuts by the Bank of England would be necessary to support the economic recovery, a move widely anticipated by financial markets in the coming months.
