OECD Keeps UK 2026 Growth Forecast at 0.9 Percent, Citing Energy Inflation from Iran Conflict

The Organisation for Economic Co-operation and Development maintained its forecast for UK gross domestic product growth at 0.9 percent in 2026, The Independent reported. Growth reached 1.4 percent in 2025. The OECD attributed renewed energy inflation to the US-Israel war with Iran and said the increase has weighed on households and firms, weakening prospects for the current year.

The report noted that the Middle East conflict has left the UK economy exposed to volatile fossil fuel prices. It recommended accelerating decarbonisation of power generation and electrification. Regional disparities continue to limit living standards and economic performance, the OECD said, citing higher unemployment and limited job opportunities for young people.

The OECD stated that the UK government’s pro-growth ambitions appropriately target long-standing weaknesses in productivity and regional disparities. Renewed geopolitical tensions and higher energy prices have compounded challenges for economic activity, inflation and public finances, the report added. It stressed the importance of maintaining momentum with policy reforms.

Andy Burnham is scheduled to replace Sir Keir Starmer as prime minister next week. Burnham plans to open a “No 10 North” office in Manchester and transfer control over utilities, transport and housing from Whitehall to the regions. Chancellor Rachel Reeves said the OECD agrees the UK has restored economic stability compared with two years ago.

She added that the UK is forecast to be the fastest-growing G7 economy in Europe in 2026 and 2027 and to borrow less this year than the G7 average for the first time since 2004. Reeves referenced her Mansion House speech, which outlined growth opportunities in artificial intelligence, EU relations and regional investment.