UK Poised to Be G7’s Second-Strongest Economy in 2025, Says OECD
London, 23 September 2025 — The UK economy is projected to finish 2025 as the second-fastest growing among the Group of Seven (G7) advanced economies, according to the Organisation for Economic Co-operation and Development’s (OECD) interim outlook. Only the United States is expected to outpace Britain this year. The Guardian+2Financial Times+2
Key Forecasts
- Growth: The OECD has nudged up its forecast for UK GDP growth in 2025 to approximately 1.4%. Financial Times+2Yahoo Finance+2
- Inflation: Meanwhile, inflation in the UK is expected to reach 3.5% this year — the highest rate among G7 countries — driven by rising food and regulated prices, wage pressures, and increases in taxation and employer contributions. The Guardian+2Financial Times+2
- Outlook for 2026: Growth is forecast to slow to about 1.0%, as tighter fiscal policies, higher trade costs, and economic uncertainty weigh on both domestic demand and exports. Inflation is expected to ease somewhat to around 2.7%. Financial Times+1
Why the UK Is Doing Relatively Well
The UK’s relatively strong performance among the G7 this year owes to several factors:
- Front-loaded growth: Economic momentum built in the first half of 2025 has helped push up year-on-year growth. ITVX+2The Guardian+2
- Policy environment: Though there is a “tighter fiscal stance” (increases in taxes and reduced spending) that will act as a drag going forward, current allowances in investment, labour income, and spending are providing support. The Independent+2ITVX+2
Risks & Challenges Ahead
- Inflation remains a serious concern — particularly food prices and regulated sectors (energy, utilities) — which threaten household spending power. Financial Times+1
- Tighter government budgets, elevated trade costs, and global economic uncertainty (e.g. from changing US tariff policies) could erode growth prospects. The Independent+2The Guardian+2
- The slowdown in 2026 may become sharper than anticipated if inflation remains sticky or if external demand weakens. Financial Times+1
Political Implications
The forecast comes at a politically sensitive moment:
- Chancellor Rachel Reeves has welcomed the upgraded growth forecasts, saying they show the UK economy is stronger than many expected. ITVX+2The Guardian+2
- However, the high inflation numbers and the projected slowdown have already triggered debate about the upcoming Autumn Budget, especially over pressures to raise taxes or cut spending.
Britain will be the fastest-growing Group of Seven economy bar the US this year, while still struggling to get a handle on its inflation problem, according to the Organisation for Economic Cooperation and Development.
