The UK has climbed the ranks of wealthy countries predicted to collectively experience the second-highest economic growth this year, according to a think tank.
The economy is now expected to grow by 1.1%, the same as Canada and France, but less than the US.
According to the Organisation for Economic Co-operation and Development (OECD)’s previous growth estimate in May, the UK ranked last among the group of advanced economies known as the G7.
Chancellor Rachel Reeves welcomed the faster growth figures, which will reinforce the optimistic tone she sought to strike in her speech to Labour conference.
She faces a dual challenge: managing expectations ahead of next month’s budget by explaining how tough the future is while also presenting a positive picture to encourage investment.
“Next month’s Budget is about fixing the foundations so we can deliver on the promise of change and rebuild Britain,” Reeves said.
According to the OECD, a globally recognised think tank, economic growth in many countries, including the UK, was “relatively robust”.
But it added: “Significant risks remain. Ongoing geopolitical and trade tensions could increasingly hurt investment and push up import prices.”
Although the OECD forecast for the UK improved this year, the country is still expected to grow only the fourth fastest ever in 2025, at 1.2%, behind only Germany and Italy.
In the UK, too, consumer prices are still expected to rise faster than in other G7 countries.
According to the OECD forecast, growth will increase by 2.7% this year and 2.4% next year.
The OECD economic forecasts, published twice a year, are intended to give an indication of what is likely to happen in the future. However, they can be inaccurate and subject to change.
Companies use them to plan investments and governments use them to guide policy decisions.
The OECD has recommended a “carefully considered” cut in interest rates and “decisive” measures to reduce government debt, giving governments more room to respond to future economic shocks.
It was argued that greater efforts to curb government spending and generate more revenue were essential to stabilize the debt burden.
Many wealthy countries face ageing populations, the challenges of climate change and geopolitical pressure to increase defence spending.
All this happened in the aftermath of the financial crisis of 16 years ago and the recent COVID pandemic, which led to increased government borrowing and debt.
However, not all economists agree that reducing debt should be the policy priority. Some would like to see borrowing rise for a while, which they argue would boost growth and reduce debt in the longer term.
