OECD warns of UK headwinds as cuts forecast

GOVERNMENT spending cuts will put the brakes on UK growth, according to influential think tank the Organisation for Economic Co-operation and Development (OECD) which yesterday slashed its forecast for the UK in 2011.

The Paris-based group said Britain will grow by 1.7 per cent in 2011, well below the 2.5 per cent it predicted in May and the 2.3 per cent expected by the Treasury.

But despite warning of “head winds” and “subdued growth”, the OECD continued to judge the Coalition’s fiscal tightening “substantial but necessary”.

The OECD’s revised forecast dragged some growth it previously saw for the UK next year into the current 12 months, upping the 2010 forecast to 1.8 per cent from 1.3 per cent. However, the pace will slow as contributions from businesses stockbuilding wane and household consumption remains subdued, it said.

The organisation forecast world growth would slow to 4.2 per cent in 2011 from 4.6 per cent this year before returning to a rate of 4.6 per cent in 2012. Last May, it projected expansion of 4.6 per cent in 2010 and 4.5 per cent in 2011.