The UK’s economic growth is set to be the weakest out of the entire G7 group of economically advanced countries, according to new analysis.
And international trade and economic progress body the Organisation for Economic Co-operation and Development (OECD) has found the country’s projected 0.2% decline in Gross Domestic Product (GDP) in 2023 will make it the second-worst performer out of the world’s 20 biggest economies.
Its analysis shows that the UK will only outperform Russia this year, with President Vladimir Putin’s state set to see a 2.5% reversal as it battles Western sanctions imposed in the wake of its invasion of Ukraine in February 2022. Experts believe the true extent of Russia’s economic struggles are being masked by how GDP is measured (for example, it can include the production of a tank that then gets blown up on the frontline in Ukraine).
The news comes after Jeremy Hunt revealed in his Spring Budget on Wednesday (15 March) that the UK would avoid a “technical recession” in 2023 - albeit with overall economic growth declining over the course of the year. Record inflation, soaring interest rates, as well as challenges including Brexit, high vacancy rates and the fallout from Liz Truss’s mini budget, have all contributed to a difficult picture for the UK.
Rishi Sunak’s government has targeted employment as a way to get the economy back on track, with his Chancellor of the Exchequer announcing an extension to free childcare and making private pension rules more generous in a bid to get parents and early retirees back onto the payroll. However, the measures are only expected to get between 55,000 and 240,000 people back into the workforce by 2027/28, according to the Office for Budget Responsibility (OBR).
UK ‘worst performer’ in the G7
In analysis published on Friday (17 March), the OECD said the UK economy’s projected 0.2% fall in GDP over the course of 2023 - a measure of how strong an economy is - would make it the worst performer in the G7 group of countries.
The G7 is an informal group made up of the world’s most economically successful democratic states: the US, France, Germany, Italy, Japan, Canada and the UK. The EU is also part of the organisation. Overall, the G7 is expected to grow 1.1% this year, with the US set to see its GDP climb by 1.5%, Japan 1.4%, Canada 1.1%, France 0.7%, Italy 0.6% and Germany 0.3%.
When expanded to the G20 - the more formalised grouping of the world’s 20 largest economies - the UK sits only above Russia, which is the only other country that is forecast to post a decline in GDP in 2023. Even Argentina, which has had to be bailed out by the International Monetary Fund (IMF) amid a major inflation crisis, will grow this year - albeit by 0.1%.
Meanwhile, the fastest-growing states - China and India - are expected to post growth of 5.3% and 5% respectively. Overall growth for the G20 and the wider world will sit at 2.6%.
The OECD has also revealed its forecast for 2024. While the UK will return to growth of 0.9%, the organisation says, this will still be behind the growth posted in most other OECD countries. The US and South Africa are projected to grow at the same rate, with Russia’s economy set to decline once again by an estimated 0.5%.
The other G7 countries are expected to post increases to their GDPs of more than 1%, with Germany out in front on 1.7%. Meanwhile, the G20 is forecast to see GDP climb 2.9%.
UK growth plan ’will improve’ economic performance
Despite the UK’s poor performance, OECD secretary general Mathias Cormann suggested this week’s Spring Budget should improve the situation.
“We believe the measures that the government is taking to address these issues are going to be very important to improve the economic outlook for the United Kingdom moving forward, but there are some particular challenges that are playing out at the moment,” he said.
His comments came as Jeremy Hunt insisted his actions would deliver economic growth. “The British economy has proven more resilient than many expected, outperforming many forecasts to be the fastest growing economy in the G7 last year, and is on track to avoid recession,” he said, repeating a Conservative Party claim that has been found to only partially be true.
“Earlier this week I set out a plan to grow the economy by unleashing business investment and helping more people into work, alongside extending our significant energy bill support to help with rising prices, made possible by our windfall tax on energy profits.”
Meanwhile, Labour’s shadow Chancellor Rachel Reeves suggested the latest statistics were another example of “13 years of Tory failure” and insisted her party would provide “the ambition to grow our economy so every part of Britain feels better off”.