LONDON 

The UK’s economic growth prospects have been downgraded Tuesday by the Organization for Economic Cooperation and Development (OECD), as global trade tensions, including fallout from Donald Trump’s tariff war, take their tolls on international investment and business confidence.

In its latest forecast published ahead of its annual meeting in Paris later this week, the OECD cut its growth projections for the UK, citing a combination of external shocks and domestic pressures.

The international body lowered its forecast for UK growth in 2025 from 1.4% to 1.3%, and from 1.2% to 1% for 2026.

“Constraints on Whitehall spending and higher than expected inflation also played a part in a downgrade,” it said.

The report echoed concerns by the International Monetary Fund (IMF) last week about UK Chancellor Rachel Reeves’s fiscal strategy, warning that Britain’s public finances were vulnerable to future shocks.

The OECD noted that a “very thin fiscal buffer” exposed the economy to “significant downside risk.”

“Efforts to rebuild buffers should be stepped up in the face of strongly constrained budgetary policy and substantial downward risks to growth,” it said. “Currently very thin fiscal buffers could be insufficient to provide adequate support without breaching the fiscal rules in the event of renewed adverse shocks.”

The OECD urged the government to limit day-to-day spending to create room for sustained levels of public investment, but acknowledged tight budget constraints meant that “only small shocks could blow spending plans off course and force the Treasury to make further cuts”.

The downgrade is part of a wider global trend, with the OECD predicting modest global growth of 2.9% for this year and next -- down from a March forecast of 3.1% in 2025 and 3% in 2026.

The effects of US-led tariff increases, particularly on trade involving North America, have played a key role in the more cautious outlook.

Reeves said in response to the report that the government’s “landmark trade deals” with the EU, US and India would “help to cut costs for businesses, protect jobs and attract investment to the UK.”​​​​​​​