OECD cuts UK 2027 growth forecast to 1% on Iran war energy costs

OECD lifts UK 2026 outlook to 1.1% on domestic demand

The Organisation for Economic Co-operation and Development has trimmed its forecast for UK economic growth in 2027, citing higher fuel prices linked to the ongoing US-Israel war in Iran.

The OECD now predicts the UK economy will grow by 1% in 2027, down from its earlier forecast of 1.1%. The agency described the downgrade as moderate.

For the current year, the OECD revised its 2026 UK growth forecast upward to 1.1%, from a previous estimate of 0.9%. The agency attributed the higher near-term projection to what it described as solid domestic demand growth.

The OECD’s previous outlook, published in June, had projected UK growth for 2026 at 0.9% and growth for 2027 at 1.1%.

The new forecast lands weeks before Chancellor John Healey delivers his first Budget at the end of October.

The OECD said the 2027 downgrade reflects higher fuel prices eating into growth, with the size of the hit depending on how long energy-supply disruptions from the Middle East conflict last.

Conflict in the Middle East has contributed to higher oil and gas prices globally, pushing up inflation in countries including the UK, the agency said.

Global growth is also expected to come in 0.1% lower next year, the OECD said, with countries including Australia, Canada, and the euro area among those facing downgraded outlooks.

The OECD listed the Middle East conflict among the principal risks to the global economy, alongside climate-change-related supply shocks. The agency said a strong El Niño could deliver weather-related supply shocks that hit farmers and push up food prices.