OECD cuts UK growth forecasts as Reeves readies budget update

LONDON (Reuters) - Britain's economy will grow more slowly than previously expected in 2025 and 2026 as global growth is hit by uncertainty, the OECD said on Monday, underscoring the challenge facing finance minister Rachel Reeves in her budget update speech next week.

The Organisation for Economic Cooperation and Development lowered its forecast for British growth this year to 1.4% from its December forecast of 1.7%. Growth in 2026 was trimmed to 1.2% from 1.3%.

The Paris-based organisation cut its outlook for many other leading economies citing the rise in uncertainty and "significant changes" in trade policies.

U.S. President Donald Trump has introduced import tariffs for many trading partners of the United States and has threatened to go further. Other countries have retaliated.

Reeves is expected to announce a lowering of Britain's official economic forecasts in her budget update speech on March 26 that is likely to include spending cuts to keep her on track to meet her budget rules.

Those official forecasts currently suggest Britain's economy will grow by 2% this year, far above most other estimates. The Bank of England recently halved its projection to 0.75%.

"This report shows the world is changing, and increased global headwinds such as trade uncertainty are being felt across the board," Reeves said in response to the OECD forecasts. 

She highlighted how the OECD expected the UK to grow more quickly than France, Germany and Italy in 2025 and 2026 and would have the second-fastest growth in the Group of Seven economies after the United States.

The OECD said British inflation was likely to average 2.7% in 2025 and 2.3% in 2026, unchanged from its December forecast but higher than in other big European economies.

(Writing by William Schomberg, editing by Andy Bruce)