OECD forecasts sluggish economic growth at under 1% this year
The UK economy is forecast to grow at less than 1% this year, with businesses investment and consumer spending predicted to dip, according to the Organisation for Economic Co-operation and Development (OECD).
Despite rising 4.3% last year, business investment, measured by fixed capital formation, is set to flatline this year.
The growth that is expected, is predicted to be driven by high government expenditure, with public sector consumption set to rise by 1.7%, compared to a 0.4% rise in private consumption.
This year’s 0.9% growth estimate is higher than previous estimations of 0.7%, with growth expected to pick up to 1.1% in 2027.
However, the inflation forecast mirrors the US, sitting higher than the rest of the G7 nations as core inflation was revised to 3.1%.
Sachin Agrawal, managing director for Zoho UK, commented: “UK businesses continue to battle sluggish growth, squeezed by cost pressures, geopolitical uncertainty and wage growth. The result is that business leaders are becoming more cautious, scrutinising spending and shifting priorities to productivity and ROI in order to tread water.”
“During economic difficulty, businesses demand more value from partners and every investment as they shore up their supply chains and, customers and employees. Tech infrastructure plays a key role, particularly with data and AI, which is a driving force for enhanced productivity as businesses look to keep costs down. It’s important that business leaders focus on long-term resilience to weather the current storm, and future ones, building trust with customers in the face of wavering confidence. When the business community is thriving then economic growth often follows.”
The OECD also forecasted that the UK unemployment rate would hit 5.5% this year, an 11-year high.
It follows the Alan Milburn review, which pointed to the cumulative cost of the current number of NEET young people to the UK as £125bn per year.
Sheila Flavell CBE, COO of FDM Group, commented: “There is clearly a long-term talent crisis in the making as businesses scale back hiring, having significant knock-on effects on the wider UK economy. The challenge is particularly stark for graduates, who are applying for hundreds of entry-level roles with little to no response as demand has shifted towards mid and senior level hires.”
“A strong jobs market is vital to sustainable economic growth and must be addressed by government, education and industry. It drives innovation and productivity while bringing through the next generation of graduate talent at the forefront of growing industries such as AI and data. These are the skills that will drive the UK’s competitive edge.”