Chancellor Rachel Reeves has been warned by the Organisation for Economic Cooperation and Development (OECD) that her wafer-thin fiscal buffers could prove inadequate if the UK economy is hit by a fresh downturn, following a downgrade to the country’s growth forecast.
In its latest economic outlook, the Paris-based body revised its UK GDP growth projections downward for both this year and next. It now expects the economy to grow by just 1.3 per cent in 2025, down from an earlier forecast of 1.4 per cent, and to slow further to 1 per cent in 2026, compared to its previous estimate of 1.2 per cent.
The OECD cited rising global trade uncertainty, persistently high interest rates, and declining household and business confidence as key factors behind the weaker outlook. It warned that sluggish economic performance could jeopardise the government’s ability to meet its self-imposed fiscal rules.
“Currently very thin fiscal buffers could be insufficient to provide adequate support without breaching the fiscal rules in the event of renewed adverse shocks,” the OECD said.
The warning comes just days after the International Monetary Fund (IMF) issued a similar alert, and ahead of the government’s three-year spending review next week. Reeves is facing mounting pressure to maintain control of ministerial budgets while honouring recent policy pledges, including a reversal on plans to limit winter fuel payments for pensioners.
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