The UK has had a rise in the rankings of wealthy countries, with the Organisation for Economic Co-operation and Development (OECD) predicting it will have the second-highest economic growth rate for 2021. The predicted growth rate is 1.1%, which is the same as Canada and France, but lower than that of the US. This growth estimate is up from the OECD’s previous prediction in May that the UK’s economy would grow by 0.4% for 2021. Chancellor Rachel Reeves has welcomed the faster growth figures, which will help reinforce the more upbeat tone she sought to strike in her speech to the Labour Conference.
Reeves faces the twin challenge of managing expectations ahead of next month’s Budget by explaining how tough times lie ahead, while attempting to paint a positive picture to encourage investment. Reeves said that “Next month’s Budget will be about fixing the foundations, so we can deliver on the promise of change and rebuild Britain.” Dan Coatsworth, an investment analyst at AJ Bell, has suggested that public sector wage increases, the end of train strikes, and a more stable political backdrop following July’s general election could all be factors behind the stronger outlook for the UK.
The OECD has noted that economic growth has been “relatively robust” in many countries, including the UK, but significant risks remain. Persisting geopolitical and trade tensions could increasingly damage investment and raise import prices. The OECD’s economic estimates, which are released twice yearly, aim to give a guide to what is most likely to happen in the future, but they can be incorrect and do change. They are used by businesses to help plan investments, and by governments to guide policy decisions.
The UK is also projected to see consumer prices rise at a faster rate than other G7 nations, with a predicted rise of 2.7% this year and 2.4% next year, the OECD forecast. The UK is only set to enjoy joint-fourth fastest growth in 2025, at 1.2%, ahead of only Germany and Italy. The OECD has prescribed a “carefully judged” reduction in interest rates and “decisive” action to bring down debt to allow more room for governments to react to any future economic shocks. The organisation has argued that stronger efforts to contain government spending and raise more revenue are key to stabilising debt burdens
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