Labour Chancellor Rachel Reeves gets big boost as top body hikes UK's growth forecasts

The hugely respected OECD gives UK the biggest growth upgrade of any G7 country, in a major economic boost to Labour and the Government ahead of next month's crucial Budget

Chancellor Rachel Reeves got a much-needed boost after forecasts for the British economy were hiked.

The highly-respected Organisation for Economic Co-operation and Development said the UK was on track to grow by 1.1% this year. The upgrade - from just 0.4% in May - was the largest in the G7 group of industrialised countries, which also includes the US, Japan, and Germany.

Ms Reeves said: “Faster economic growth figures are welcomed, but I know there is more to do and that is why economic growth is the number one mission of this government. Next month’s Budget will be about fixing the foundations, so we can deliver on the promise of change and rebuild Britain.”

The upgrade will go some way to ease pressure on the Chancellor ahead of the crucial Budget on October 30. Labour has warned the country to brace itself for “difficult choices” as it looks to tackle a £22billion black hole left by the Tories.

But in another piece of help for the Chancellor, the OECD’s chief economist said the UK should rewrite “fiscal rules” to allow higher public investment to drive growth. Álvaro Pereira’s comments could help Ms Reeves make the case for a rethink - something she has indicated she is already considering.

The OECD, a think tank for 38 rich countries, said the pick-up in UK growth was likely to continue into nex year, with a forecast 1.2% expansion in 2025. It placed the UK joint second in its economic growth forecasts for the rest of 2024. The prediction of 1.1% growth for the whole of this year puts the UK alongside Canada and France but behind the US. Last time the OECD put out a forecast, in May, it had the UK at the bottom of the G7 pile.

However, it warned the UK was likely to suffer from persistent inflation. At an average 2.7% this year, the UK would still be the country in the G7 with the fastest-rising prices. The OECD urged Ms Reeves to not just raise taxes but look at wider reforms of the tax system ahead of the Budget