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OECD: UK growth will hit zero in 2023

According to data from the Organisation for Economic Co-operation and Development, growth in the UK is slowing down amid persisting supply chain shortages and rising inflation.

This follows a decline of 0.1% in growth in March and no growth in February.

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Meanwhile, the OECD found inflation is set to keep rising, peaking at over 10% by the end of this year as the UK faces continued labour and supply shortages, as well as high energy prices linked to the war in Ukraine.

In March this year, vacancies reached 1.3m, and while the unemployment rate fell to 3.7%, the level remains above pre-pandemic figures.

By the end of 2023, however, inflation is expected to have gradually declined to 4.7%, helped by tighter monetary policy and easing supply constraints.

Amid rising prices in the UK, the OECD found private consumption will slow as household incomes are stretched. The OECD found that real wages in January to March this year were 1.2% weaker than in 2021.

As a result of the stagnating growth, household savings are expected to decline to below their pre-pandemic levels with some households having to take on more debt to keep up.

In response to its findings, the OECD recommended that the government considers slowing fiscal consolidation to support UK growth.

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The organisation also recommended the government be clearer about its approach to the transition to a net-zero economy in order to encourage the necessary investment such a transition requires.

It suggested concrete deadlines, policies and priorities with a target-consistent emission pricing trajectory as it observed the UK’s current policies are not sufficient to meet the net-zero target.

 

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