Fresh blow to Reeves as UK economic forecast slashed

Rachel Reeves’s mission to grow the UK economy has taken yet another knock, as the country’s economic forecast has been slashed as a result of a mounting trade war sparked by Donald Trump’s global tariffs.

- MILLIE COOKE, JABED AHMED and ARCHIE MITCHELL

Experts warned of rising inflation and a hit to world growth, dashing Labour’s hopes of reviving Britain’s spluttering economy, central to the party’s mission for government.

The Organisation for Economic Cooperation and Development (OECD) cut its predictions for UK growth to 1.4 per cent in 2025 and 1.2 per cent in 2026, down from 1.7 per cent and 1.3 per cent respectively from its previous predictions.

For the world economy, the OECD said growth would slow from 3.2 per cent in 2024 to 3.1 per cent in 2025 and 3 per cent in 2026, down from 3.3 per cent previously forecast for both years, largely as a result of trade tensions sparked by the new US president.

Earlier this month, Mr Trump’s new policies came into effect, seeing imports from Canada and Mexico taxed at 25 per cent, with Canadian energy products receiving 10 per cent tariffs.

While the UK has so far avoided harsh penalties, it has been caught by last week’s sweeping 25 per cent tariffs on steel and aluminium entering America.

In addition, the 10 per cent tariff that Mr Trump placed on Chinese imports in February doubled to 20 per cent. Countries have been quick to retaliate and financial markets were sent reeling last week over fears the measures could spark a recession in the US.