The UK is set to suffer the highest inflation among G7 nations this year, the Organisation for Economic Co-operation and Development (OECD) has warned.<\/p>\n
Amid resurgent food prices, with some retailers blaming the UK government\u2019s \u00a325bn-a-year increase in employer national insurance contributions for pushing up costs, the OECD predicts that inflation in the UK will average 3.5% in 2025.<\/p>\n
The figure is well above even that of the US, at 2.7%, despite Donald Trump<\/a> imposing the biggest tariffs since the 1930s on imports \u2013 a policy generally expected to push up prices.<\/p>\n The OECD said UK inflation would slow to 2.7% next year, still well above the Bank of England\u2019s 2% target.<\/p>\n The Bank has pointed to regulated prices such as water and energy bills, as well as the NICs rise, to help explain above-target inflation.<\/p>\n Alongside its inflation warning, the OECD suggested tough tax and spending plans would put the brakes on economic growth in the UK over the next twelve months.<\/p>\n It predicts modestly stronger GDP growth for the UK this year of 1.4%, up from 1.3% in its last forecast. However, its projection for next year is unchanged at a relatively sluggish 1% \u2013 an unhelpful forecast for the chancellor, Rachel Reeves, as Labour battles to kickstart growth.<\/p>\n The body said Britain\u2019s \u201ctighter fiscal stance\u201d \u2013 higher taxes and reduced government spending \u2013 was expected to weigh on the economy. Reeves will present her budget, at which she is expected to raise taxes, on 26 November.<\/p>\n If the OECD\u2019s growth forecasts prove accurate, that would put the UK\u2019s GDP growth rate for next year in the middle of the pack for the G7 nations \u2013 behind the US (1.5%), Germany (1.1%) and Canada (1.2%) but ahead of Italy (0.6%), Japan (0.5%) and France (0.9%). This year, the UK is expected to be the second fastest-growing country in the G7, behind the US.<\/p>\n Labour\u2019s target before last year\u2019s general election was to \u201csecure the highest sustained growth in the G7\u201d \u2013 though it was unclear over precisely what period.<\/p>\n Responding to the OECD forecasts, Reeves said: \u201cThese figures confirm that the British economy is stronger than forecast \u2013 it has been the fastest growing of any G7 economy in the first half of the year. But I know there is more to do to build an economy that works for working people \u2013 and rewards working people.\u201d<\/p>\n The Conservative party leader, Kemi Badenoch, said: \u201cThe OECD report is a damning verdict on Starmer\u2019s weak economic management. Growth is shrinking, inflation highest in the G7 \u2013 all driven by Labour\u2019s tax hikes. Britain needs strong leadership and a clear plan.\u201d<\/p>\n The tricky UK forecasts came in the OECD\u2019s interim economic outlook, in which the Paris-based club of industrialised countries said the economic impact of Trump\u2019s tariffs had been slower than expected to materialise, but would hit global growth in the coming months.<\/p>\n It has upgraded its projection for global GDP this year, to 3.2% \u2013 up from the 2.9% it expected in its last forecast in June<\/a>.<\/p>\n \u201cGlobal growth was more resilient than anticipated in the first half of 2025, especially in many emerging-market economies,\u201d it said in its interim economic outlook, adding that \u201cindustrial production and trade were supported by front-loading ahead of higher tariffs\u201d.<\/p>\n However, with labour markets in several countries, including the US, already slowing and the impact of front-loaded exports waning, the OECD expects weaker global growth of 2.9% in 2026 \u2013 the same as in its June forecast.<\/p>\n