UK Economy Downgraded by OECD Amid Trump Tariff Uncertainty

The Organisation for Economic Co-operation and Development (OECD) has revised down the UK’s 2025 and 2026 growth projections, citing escalating global trade tensions and persistent inflationary pressures. According to the Paris-based economic body, the UK economy is now expected to grow at 1.4% in 2025, down by 0.3 percentage points, and 1.2% in 2026, a decrease of 0.1 percentage points from earlier forecasts.

The OECD notes that while these numbers still position the UK among the top-performing G7 economies, they present a challenging outlook for Britain’s Chancellor, Rachel Reeves. With the Chancellor preparing for this month’s Spring Statement, the downgraded forecast increases the pressure on fiscal planning, particularly as meeting key fiscal targets may now require significant spending cuts.

Despite the downgrade, inflationary expectations remain steady, with consumer prices forecasted to average 2.7% in 2025 and 2.3% in 2026. Interest rates, currently at 4.5%, are expected to hover around 4% until late 2026. These sustained inflation and interest rate levels reflect global trade concerns, including the impact of a universal 25% tariff on Canadian and Mexican imports imposed by former US President Donald Trump’s administration.

Although the OECD’s assessment highlights challenges for the UK, it warns that the most significant economic disruptions are reserved for the United States, Canada, and Mexico. Canada’s growth has been downgraded to 0.7% annually for 2025 and 2026, while Mexico faces a contraction of 1.3% in 2025, plunging it into recession. The broader ripple effects of these trade policies may also slow growth in the European Union and other major economies.

Addressing the report, the Chancellor stated, “This report underscores the shifting nature of the global economy. As Britain adapts to these changing headwinds, our commitment to stability and progress will ensure that our economy remains resilient and secure while protecting working people.” Her comments reaffirm a balanced economic approach focused on long-term security and renewal.

Moving forward, the OECD urges governments worldwide to work collaboratively to address trade policy disputes and reduce the risks of further economic fragmentation. Proposals from the organisation also advocate for regulatory reforms and investment in skills and dynamic labour markets to strengthen resilience in global supply chains and improve living standards.