RACHEL Reeves received a blow just days out from her Spring Statement after the UK economy was downgraded.
Britain has been caught up in the tailwinds of a hit to global growth and rising inflation triggered by an escalating trade war.
PARachel Reeves meets regulators in Downing Street today to reduce red tape for business[/caption]
UK economy is now predicted to grow by just 1.4 per cent this year which is down from previous predictions of 1.7 per cent.
The forecasts from the Organisation for Economic Co-operation and Development is also cut for next year from 1.3 per cent to 1.2 per cent.
The warning shot came as Rachel Reeves prepares to deliver her Spring Statement next week as she tries to balance the books amid speculation her £10 billion financial headroom has been wiped out.
It also comes after UK GDP figures showed last week that the economy shrunk by 0.1 per cent for the first month of the year.
The Chancellor meets regulators in Downing Street today to rip-up burdensome red tape to save business billions of pounds to kick start the economy.
But the OECD also said world growth would slow from 3.2 per cent last year to 3.1 per cent in 2025 and three per cent next year.
They had previously said the economy would grow by 3.3 per cent this year and next but the tariff war sparked by Donald Trump has led to the slowdown forecast.
The US is now expected to see its growth downgraded from 2.4 per cent to 2.2 per cent this year – and from 2.1 per cent to 1.6 per cent next year.
Chancellor Rachel Reeves said: “This report shows the world is changing, and increased global headwinds such as trade uncertainty are being felt across the board.
“A changing world means Britain must change too, and we are delivering a new era of stability, security and renewal, to protect working people and keep our country safe.
“This means we can better respond to global uncertainty, with the UK forecast to be Europe’s fastest growing G7 economy over the coming years – second only to the US.”
The OECD said in its interim economic outlook report that “consumers face much of the burden of higher tariffs” as it cautioned over a “significant” impact on living standards.
The OECD said: “Further fragmentation of the global economy is a key concern.
“Higher and broader increases in trade barriers would hit growth around the world and add to inflation.
“Higher-than-expected inflation would prompt more restrictive monetary policy and could give rise to disruptive repricing in financial markets.”
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