25 November 2022

FT: UK’s growth prospects worst among top economies, warns OECD

The UK economy is set to be the worst performer in the G20 bar Russia over the next two years, the OECD said on Tuesday, underlining the lasting impact of high energy prices on Europe as a whole.

The OECD said in its latest economic forecasts that UK gross domestic product would fall 0.4 per cent in 2023 and rise a mere 0.2 per cent in 2024. That would be a longer and deeper downturn even than the forecast for Germany, whose manufacturing-intensive economy is particularly vulnerable to high energy prices.

In an apparent reference to Brexit, Álvaro Santos Pereira, the OECD’s acting chief economist, said the economic adjustment under way in the UK had compounded longstanding concerns about the country’s low productivity growth. He singled out Britain’s need to forge post-Brexit commercial relations with the rest of the world, with “trade deals that you need to export and so on high on the agenda”.

The UK is already the only country in the G7 where output has not yet regained its pre-pandemic levels. Britain’s Office for Budget Responsibility said last week that households were facing the steepest fall in living standards on record as the economy entered recession.

The Paris-based organisation also hit out at the UK government’s pledge to hold average household energy bills at £2,500 until April, saying the untargeted support would “increase pressures on already high inflation in the short term”, leading to higher interest rates and debt service costs.

The OECD said business sentiment was starting to recover from “a period of deterioration driven by policy uncertainty” — an allusion to the hastily reversed “mini” Budget under former prime minister Liz Truss. But it said “lingering uncertainty”, combined with higher costs of capital, would continue to weigh on business investment...

 more at  FT

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