UK economy will grow by less than expected next year, OECD says

The UK will grow by less than expected next year amid the ongoing US-Israel war in Iran, an international agency has said.

It is one of many countries whose economic prospects are facing a hit due to the prolonged conflict, the Organisation for Economic Co-operation and Development (OECD) said.

The downgrade to the UK's economic growth outlook is moderate, according to the OECD, which predicted it will grow by 1% in 2027, against an earlier forecast of 1.1%.

The agency also upgraded the UK's growth outlook for 2026, from an expected 0.9% to 1.1% for the year.

The prediction comes as Chancellor John Healey prepares to deliver his first Budget at the end of October.

Prime Minister Andy Burnham has made easing the cost of living for household one of his key aims, while the government is under pressure to spend more on defence.

However, Burnham and Healey face a difficult balancing act, trying to offer more support to households while sticking to Labour's manifesto commitments on tax and the government's self-imposed fiscal rules.

Inflation has also pushed up the cost of interest on government debt, which alongside an unexpected surge in government borrowing in August has added to the pressure on Healey.