The UK is set to be the worst performing economy in the G7 in 2025, according to a forecast from an economic think tank.
The Organisation for Economic Cooperation and Development (OECD) cut its forecast for the UK’s growth outlook for GDP to 0.4% this year down from 0.7%.
The think tank predicted the UK’s growth would be the second worst in the group for 2024 – only Germany is expected to have a slower economic growth this year, at 0.2%.
The forecaster expects the UK’s fortunes to take a turn for the worst next year, too.
It cut predictions for 2025 growth down to 1% from 1.2%, and thinks the UK will become the slowest growing economy in the G7.
In fact, in 2025 the UK is set to have the same growth as Russia, despite the heavy sanctions against it and the resource drain of the Ukraine war.
The 1% growth is also half of the number predicted by the Treasury’s independent forecaster, the Office for Budget Responsibility.
The think tank pinned this bad news down to the UK’s ongoing price rises in the services sector and a shortage of skilled staff, which is pushing up salaries in industrial and commercial sectors.
To make things even worse, the OECD actually had quite a positive outlook for the global economy, expecting it grow by 3.1% in 2024, and 3.2% in 2025.
The think tank urged the UK to only increase public spending when interest rates decrease, and called for childcare reforms to help with economic inactivity.
The news – released on the day of the local elections – is just the latest blow for PM Rishi Sunak, as the country is still grappling with the cost of living crisis.
Sunak made growing the economy one of his five pledges at the start of 2023, shortly after getting into Downing Street.
However, chancellor Jeremy Hunt downplayed the implications of the forecast, saying it was “not particularly surprising” because the government has been focused on inflation.
He said: “We are winning that war, growth matters which is why it is significant that last month the IMF predicted the UK will grow faster over the next six years than any European G7 country or Japan.
“To sustain that we need to stick to our plan – competitive taxes, a flexible labour market and far-reaching welfare reform.”
However, Darren Jones, Labour’s shadow chief secretary to the Treasury, said: “Today’s news that growth has been downgraded again reminds the British people what they already know: after 14 years of failure, the Conservatives cannot fix the economy because they are the reason it is broken.
“It’s time for change. Only Labour has a long-term plan to grow the economy and make working people better off.”
Liberal Democrat Treasury spokesperson Sarah Olney said: “This Conservative government is economically illiterate.
“Their no-growth policies have left the public enduring sky-high mortgage rates, the price of a weekly shop going through the roof, and stealth taxes hammering both pensioners and working people.
“The only way through this quagmire of economic stagnation that the Conservative party has led us into is a general election.
“This Conservative government is out of touch, out of ideas and should be kicked out of office.”