The big verdict on UK economic performance is in, and it makes grim reading. The latest biannual Organisation for Economic Co-operation and Development (OECD) report confirms what many of us have suspected: the UK is in trouble, and Chancellor Rachel Reeves is making a bad situation worse.
Our inflation is set to be the highest in the G7 this year, forecast to average 3.5% across 2025. That’s way ahead of the eurozone at just 2.1% and the US at 2.7%.
We don’t have the highest inflation rate in the world. In Argentina, it’s set to hit 220% this year. Turkey, Russia, Brazil and Mexico all have higher inflation than us. But we’re in poor company.
Reeves must take a share of the blame.
As the Bank of England pointed out last week, her disastrous Budget decision to hike employers’ national insurance by £25billion has driven up prices as companies passed the cost on to consumers. The OECD also highlights the damage done by higher taxes generally.
It forecasts that inflation will ease slightly to 2.7% in 2026, but that’s still above the BoE’s 2% target. And it will make interest rate cuts this year or next even less likely.
At the same time, the economy is barely moving.
The OECD forecasts the UK economy will grow by just 1.4% this year, a modest improvement on last year’s 1.1%.
Sadly, it won’t last. In 2026, GDP growth is forecast to fall to a miserable 1%.
At that pace, Reeves will struggle to balance the books and may be forced into yet another round of tax hikes. If she’s still Chancellor by then.
In her defence, the eurozone is also sluggish, with forecast growth of 1.2% across 2025 and just 1% in 2026.
Reeves was quick to cherry-pick the report, boasting: “These figures confirm that the British economy is stronger than forecast – it has been the fastest growing of any G7 economy in the first half of the year.”
That’s true for now but over the full year, the US will overtake us, with forecast growth of 1.8% this year and 1.5% next.
Today could have been better. Reeves’s tax-and-spend choices are dragging the economy down, slowing consumer demand and investment alike.
November’s Budget could make matters worse, as she battles to plug a black hole in the nation’s finances estimated between £20billion and £40billion.
Food prices are set to rise by 6% this year, driven by higher wages, the packaging tax, and the NI increase.
The jobs market is softening, with employers cutting back on hiring. The OECD warns that unless productivity improves, this squeeze could persist well into 2026.
Reeves may trumpet modest GDP growth as a victory, but it’s a hollow one. She’s driving the country’s inflation problem through her own policies.
And she could make everything worse by doubling down on tax hikes in November. Today’s OECD figures make one thing clear: the Chancellor has made Britain more expensive, not more competitive, and we’re all worse off for it.
