Britain’s economy is set to grind to a halt next year as the country records zero growth and falls behind all other major developed nations except Russia, according to new analysis.
The Organisation for Economic Co-operation and Development (OECD) forecasts that the UK will continue to be plagued by high inflation and will not grow at all next year.
The international body warned that war in Ukraine had had immediately slowed the global economic recovery from Covid-19 and resulted in higher inflation.
Europe has been impacted most severely because of the continent’s heavy reliance on energy imports, the OECD said, adding that the war had again underlined the need for energy security and an acceleration of the green transition.
It slashed its forcecast for global growth to 2.8 per cent next year, down sharply from predictions made in October.
“Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, dampening the recovery,” OECD Secretary-General Mathias Cormann said during a presentation on Wednesday.
“This slowdown is directly attributable to Russia’s unprovoked and unjustifiable war of aggression, which is causing lower real incomes, lower growth and fewer job opportunities worldwide.”
The euro area economy is expected to expand by just 1.6 per cent and the US by 1.2 per cent. UK growth is estimated to be zero, in line with Bank of England estimates.
The OECD forecasts no growth in 2023 for the UK economy
No growth and high inflation would mean a further drop in living standards for British houseolds which have already begun to feel the effects of a cost-of-living crisis.
Fuel prices have surged to new record highs on an almost weekly basis while energy bills are on course to more than double.
The OECD’s report suggests further price rises are in store with inflation remaining higher for longer than had previously been expected, reaching levels not seen since the 1970s in some countries, including the UK.
“High inflation is eroding household incomes and spending, hitting vulnerable households particularly hard,” the report said.
“The risk of a serious food crisis remains acute for the world’s poorest economies because of the high risk of supply shortages and elevated costs.”
The figures laid bare the “extreme challenges” facing the UK economy, said Labour’s shadow chancellor Rachel Reeves.
“That economic growth in the UK will grind to a halt next year, with only Russia performing worse than us in the G20, is a shameful indictment of the chaos and incoherence of this Conservative government.
“It reveals a Tory economic strategy centred around low growth and high taxes.
It came as the boss of one of the world’s biggest commodity traders warned that oil prices could enter a “parabolic state” as supplies dwindle later this year and buyers compete for limited barrels of crude.
“We have got a critical situation,” Jeremy Weir, chief executive of Trafigura, told a Financial Times conference on Tuesday.
“I really think we have a problem for the next six months . . . once it gets to these parabolic states, markets can move and they can spike quite a lot.”
