OECD upgrades the UK's growth forecast

Chancellor George Osborne was given a boost just weeks ahead of his Autumn Statement as the UK's growth forecast was upgraded by a leading economic body

Stefan Rousseau/PA Wire Chancellor George Osborne
Chancellor George Osborne

Chancellor George Osborne was given a boost just weeks ahead of his Autumn Statement as the UK's growth forecast was upgraded by a leading economic body.

In its latest assessment of the state of the global economy, the Organisation for Economic Co-operation and Development (OECD) upgraded the UK’s forecast growth for 2014 to 2.4%, up from its previous prediction of 1.5% in May.

The Paris-based organisation said the global recovery was “real” but moving at a “slow speed” and warned that there could be further turbulence ahead, warning that political brinkmanship over the US economy could derail progress.

A Treasury spokesman said: “The OECD have revised their forecast for UK GDP up by more than any other G7 country over the next two years.

“This provides more evidence that the UK’s hard work is paying off and the country is on the path to prosperity.

The report also highlights the risks that remain to the recovery and urges the UK to stick to the Government’s plan that is growing the economy, lowering the deficit and inflation, and creating jobs.

“This is the only sustainable way to raise living standards for hard-working families.”

The OECD’s report said there had been a “turnaround in private sector confidence” in the UK and “growth is projected to strengthen further in 2014 and 2015, mainly supported by an upturn in gross fixed investments and exports”.

With the Chancellor due to make his Autumn Statement on December 5, the OECD warned against any deviation from the Government’s efforts to balance the books and called for action to restrict the rise in house prices.

In its assessment of the UK economy the OECD said: “While headline deficits are expected to shrink as growth recovers, it is important to maintain existing consolidation plans to restore fiscal stability.

“Further relaxing the barriers holding back housing supply is an important policy priority to contain house price inflation.”

The body also noted that “real earnings have continued to fall, with inflation exceeding weak nominal wage growth”.

Although there has been strong employment growth “the unemployment rate remains high and many workers would like to increase their working hours, which suggests an additional margin of slack”.

Shadow treasury chief secretary Chris Leslie said: “After three damaging years of flatlining this OECD forecast for the UK is welcome, but for millions of families this is still no recovery at all. As the OECD says, real wages are still falling in Britain.

“In fact working people are on average £1,600 a year worse off since David Cameron came to office. So we need action to secure a strong, balanced and sustainable recovery that works for the many, not just a few at the top.”

Leslie added: “Labour will help people facing a cost-of-living crisis by freezing energy prices until January 2017 and expanding free childcare for working parents.

“And we have called for a tax cut for 24 million working people on middle and lower incomes by introducing a lower 10p starting rate of tax.

“The OECD is also right to warn that we need to boost housing supply.

“We need a recovery that’s built to last, so we must also bring forward infrastructure investment now to build thousands of affordable homes.

“And we need to make long-term changes so that our economy works for working people.

“That’s why Labour will cut business rates for small firms, reform our banks, strengthen the minimum wage and introduce a compulsory jobs guarantee for the long-term unemployed.”

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