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45m ago

OECD Warns Tariff Shock Still Building as UK Faces Slower Growth and Elevated Inflation

Fresh OECD projections heighten pressure on Rachel Reeves to deliver a tighter Budget.

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A worker installs parts at the start of an assembly line at an Ariens factory in Brillion, Wisconsin, U.S., March 5, 2025. REUTERS/Tim Aeppel/File Photo
The container ships Maribo Maersk and Bianca Rambow sit moored at a terminal wharf in Bremerhaven, Germany, August 13, 2025. REUTERS/Leon Kuegeler/File Photo
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Overview

  • The OECD lifted its 2025 global growth forecast to 3.2% but kept 2026 at 2.9%, warning that the full effects of U.S. tariff hikes are still to come after temporary support from front‑loading of imports and AI investment.
  • For the UK, growth is forecast at 1.4% in 2025 and 1.0% in 2026, with a tighter fiscal stance expected to restrain demand and add to trade frictions.
  • UK inflation is projected at 3.5% in 2025 and 2.7% in 2026, the highest in the G7 this year and still above the Bank of England’s target next year.
  • S&P Global’s flash UK PMI fell to 51 in September from 53.5, signaling weaker output, deteriorating confidence and sizeable job losses even as price pressures eased.
  • KPMG forecasts tax rises in the autumn Budget and expects the Bank of England to cut rates once before year‑end with further reductions in 2026, reaching roughly 3.25% by the end of next year.