The Organisation for Economic Co-operation and Development (OECD) has downgraded its forecast for the UK’s economic growth, citing slower-than-expected growth due to the impact of Donald Trump’s tariff war on trade and investment. The OECD now expects UK growth to be 1.3% in 2025 and 1% next year, a reduction from previous forecasts.
The US, Mexican, and Canadian economies are likely to be the worst affected by the tariff battles, according to the OECD. The international body also downgraded its forecast for global growth, expecting a modest 2.9% growth this year and next.
The UK government’s fiscal rules have been criticized as exposing the economy to significant downside risk due to a “very thin fiscal buffer”. The OECD urged the government to restrict day-to-day spending to provide financial room for higher levels of public investment.
Chancellor Rachel Reeves faces tough questions about her record in light of the downgrade, with government spending constrained by rising health, pension, and defence costs. The chancellor plans to base her spending review on forecasts from the Office for Budget Responsibility, which predicted a 1% growth this year but a strong recovery next year.
OECD chief economist Álvaro Pereira expressed caution about the UK’s ability to withstand the uncertainty created by global tariff wars, citing concerns over trade barriers and economic policy uncertainty. The OECD hopes for more trade agreements that would bring certainty to international trade.
Source: https://www.theguardian.com/business/2025/jun/03/uk-slump-growth-2026-trump-tariffs-oecd-us-mexico-canada