The OECD has highlighted the need for additional revenue in the UK to withstand economic shocks, suggesting that taxes will need to be raised. This warning comes despite Chancellor Rachel Reeves previously stating that she would not need to resort to further borrowing or tax increases. The UK economy is expected to perform well next year, with growth projected at 1.7 per cent, making it the best-performing G7 economy. However, the OECD warns that Budget changes may crowd out business investment in the future.
Reeves emphasized that growth is the government’s top priority and that the upgraded growth forecast will benefit individuals by putting more money in their pockets. The report also suggests that interest rates may not fall as much as expected, with the Bank of England predicting about four interest rate cuts next year. The government’s spending plans are expected to keep inflation at 2.7 per cent next year, with a slower interest rate fall expected to reach 3.5 per cent by the first part of 2026. National insurance contributions and their impact on firms balancing prices, wages, and employment levels were highlighted by the Bank of England chief as a significant issue.
There has been a record number of companies de-listing from the London Stock Exchange this year, with 45 companies having de-listed so far. Sir Keir Starmer faced criticism for refusing to reiterate his pledge that the UK will have the fastest growth in the G7 during a tense exchange with Tory leader Kemi Badenoch. However, Downing Street later clarified that the government remains committed to this goal. The global economy is predicted to grow by 3.2 per cent this year and 3.3 per cent next year, exceeding previous predictions.
The ongoing challenges in the UK economy, including the need for additional revenue, potential interest rate cuts, and the impact of national insurance contributions on businesses, are key concerns highlighted in the OECD report and by Bank of England chief Andrew Bailey. While the UK is expected to be the fastest-growing European economy in the G7 over the next three years, there are concerns about the long-term impact of Budget changes on business investment. Economic growth projections for the global economy have been revised upwards, indicating a more positive outlook overall.
Reeves and the government are facing pressure to address public finances in a way that supports sustainable economic growth while managing inflation and interest rates. The impact of tax hikes on individuals and businesses, as well as the need to balance economic priorities, will be key considerations moving forward. The government’s commitment to growth as a top priority underscores the importance of financial stability and government revenue in achieving long-term economic prosperity. The OECD report and statements from key figures in the Bank of England highlight the challenges and opportunities facing the UK economy in the coming years.
