OECD Cuts UK Growth Forecast for 2027 as Middle East Conflict Drives Up Fuel Prices

The UK’s economic growth is expected to be weaker than previously forecast in 2027 as the ongoing Middle East conflict pushes up fuel prices, the OECD has warned.

The Organisation for Economic Co-operation and Development (OECD) said the UK is among several countries whose economic prospects have been affected by prolonged conflict and supply disruption.

UK growth forecast cut to 1% in 2027

The OECD has lowered its forecast for UK economic growth in 2027 to 1%, down from its previous estimate of 1.1%.

However, it raised its forecast for UK growth in 2026 to 1.1%, compared with the earlier prediction of 0.9%.

The latest outlook comes as Chancellor of the Exchequer John Healy prepares to deliver his first Budget at the end of October.

Strong domestic demand supports growth in 2026

In the short term, the UK economy is expected to perform better in 2026 than the OECD predicted in June, driven by “strong domestic demand growth”.

Growth is expected to slow in 2027 as higher fuel prices weigh on the economy. The OECD said the impact will depend on how long supply disruptions continue.

Global economy faces conflict and climate risks

The OECD said supply shocks linked to conflicts in the Middle East and the effects of climate change pose risks to the global economy.

Global economic growth is also expected to fall by 0.1% next year, with countries including Australia, Canada and those in the euro zone affected.

Conflicts in the Middle East are contributing to higher global oil and gas prices, increasing inflationary pressure in countries including the UK.

The OECD also warned that weather-related events, including a strong El Niño, could harm farmers and lead to higher food prices.