The UK is set to record the highest inflation among G7 nations this year, according to the Organisation for Economic Co-operation and Development (OECD).
The Paris-based body forecast UK inflation averaging 3.5% in 2025, well above the US at 2.7% despite President Donald Trump’s sweeping tariffs on imports.
The OECD expects UK inflation to ease to 2.7% in 2026 but remain above the Bank of England’s 2% target.
Rising food prices, higher water and energy bills, and the government’s £25bn-a-year increase in employer national insurance contributions are among the factors blamed for persistent price pressures.
Alongside its inflation warning, the OECD projected sluggish UK growth. It expects GDP to rise 1.4% this year slightly higher than previous forecasts but just 1% in 2026, weighed down by higher taxes and reduced spending. That leaves the UK mid-table among G7 economies, behind the US, Germany and Canada but ahead of Italy, France and Japan.
The forecasts come ahead of Chancellor Rachel Reeves’s November budget, where further tax rises are expected. Reeves said the figures showed Britain’s economy was stronger than expected but admitted more to do to deliver growth.
Conservative leader Kemi Badenoch accused Labour of “weak economic management”, saying the OECD’s findings showed “growth is shrinking, inflation highest in the G7 all driven by Labour’s tax hikes”.
Globally, the OECD upgraded its 2025 growth forecast to 3.2% on stronger-than-expected performance in emerging markets, but warned of risks from Trump’s tariff policies, volatile crypto markets, and fiscal pressures.
US growth is expected to slow from 2.8% last year to 1.8% this year, as the full impact of Trump’s tariffs and tighter immigration rules takes hold.
