The UK economy is facing a prolonged period of stagnation with inflation set to remain significantly higher than other major economies, according to a stark warning from the Organisation for Economic Co-operation and Development (OECD).
In its latest economic outlook, the Paris-based organisation predicted Britain's inflation rate will still be running at 2.7% by the end of 2025 - the highest among all G7 nations and nearly a full percentage point above the Bank of England's target.
Growth Prospects Dim Among Advanced Economies
The OECD forecasts meagre GDP growth of just 0.4% for the UK this year, rising slightly to 1% in 2025. This places Britain near the bottom of the international growth league table, with only Germany among G7 countries expected to perform worse.
Key findings from the report include:
- UK inflation projected to remain at 3.3% in 2024 before dropping to 2.7% in 2025
- GDP growth forecasts of 0.4% (2024) and 1% (2025) significantly below historical averages
- Interest rates expected to remain higher for longer, maintaining pressure on households
- UK performing worse than comparable economies like France, Italy and Canada
Political Pressure Mounts on Sunak Government
The damning assessment delivers a significant blow to Prime Minister Rishi Sunak's economic credibility ahead of the general election. Chancellor Jeremy Hunt had previously pointed to falling inflation as evidence that the government's economic plan was working.
"The OECD's report confirms what millions of British families already know - the cost-of-living crisis is far from over," said a leading economic analyst. "With inflation persisting well above target, the Bank of England faces a difficult balancing act between supporting growth and controlling prices."
International Comparison Highlights UK Struggles
While the OECD upgraded its growth forecast for many advanced economies, the UK's outlook remains decidedly gloomy. The United States is expected to grow by 2.6% this year, while the eurozone average sits at 0.7%.
The report suggests that persistent inflationary pressures, combined with the lingering effects of Brexit and higher interest rates, continue to hamper Britain's recovery from the pandemic and energy price shocks.
With the general election approaching, these economic challenges are likely to dominate political debate as parties present their visions for restoring Britain's economic vitality and tackling the ongoing cost-of-living pressures facing households across the nation.
