THE UK economy will grind to a halt next year and will only be better than Russia’s among the G20, the OECD forecast on Wednesday.
The report identified high rates of inflation alongside another round of tax increases as the main drivers behind the projected poor performance.
The forecast has further emphasised the obstacles that Boris Johnson will likely face as he takes a weakened position following his damaging no-confidence vote on Monday.
When touching on the problems specific to the UK compared to other rich countries, chief economist of the OECD Laurence Boone said the UK was unique in tackling high inflation, rising interest rates and increasing taxes at the same time.
“Inflation is high compared with other OECD countries in the G20 ... that’s one thing. The other thing is there is fast monetary tightening which is obviously responding to [the inflation] and there is fiscal consolidation which is the highest in the G7,” she said.
“There is the sensitivity of manufacturing to the global supply chain and there is also probably a bit of Brexit [in explaining the poor performance] although we are not really able to disentangle each of these factors specifically.”
The organisation reported that the UK economy would grow by 3.6 percent in 2022, although much of that reflected recovery from coronavirus at the end of last year.
However, as households are increasingly squeezed, growth could fall to zero next year. The report also says that inflation would stay high and average 7.4% in 2023 after having hit double figures later in 2022.
The OECD said the economy would be “stagnating in 2023 due to depressed demand”.
The report also claimed that there were many other risks to be factored in and that if any of them became a reality the situation would be made even worse.
“Spillovers from economic sanctions and higher than expected energy prices as the Ukraine war drags on, and a deterioration in the public health situation due to new Covid strains are significant downside risks,” the report said.
And it found that more expensive goods and energy prices would negatively impact real incomes even further and that there was no certainty that the Bank of England would be able to reduce inflation to its 2% target.
“A prolonged period of acute supply and labour shortages could force firms into a more permanent reduction in their operating capacity or push up wage inflation further,” the OECD said.
Scottish Green MSP Maggie Chapman said: "Whether it is runaway inflation or skyrocketing energy prices, the economic vandalism of Downing Street has done so much to exacerbate the cost-of-living crisis that so many people are facing. The PM and his colleagues know all about the misery and poverty that they are inflicting, but they simply don't care. Their solution is always more cuts, austerity, and deregulation.
"The problem is bigger than Boris Johnson. It is the terrible choices of successive UK Governments and the policies that they represent. With independence we can do things differently. We can follow a different path and build a fairer, greener economy that works for people and planet."
Commenting, SNP MSP Michelle Thomson said: "This OECD forecast is a devastating indictment of the Tories Brexit policies and is yet another example of the heavy price people across Scotland are paying for continued Westminster control.
“This appalling economic forecast is the result of Brexit, over a decade of Tory austerity, endless brutal Conservative cuts, and decades of Westminster governments Scotland didn't vote for.
"Brexit was imposed on Scotland, ripping us out of a market seven times bigger than the UK – but it does not have to be this way.
“Ensuring that the people of Scotland are able to exercise their democratic right to vote for a better future is now crucial so we can escape a future shaped by disastrous Tory policies and create a fairer, thriving Scotland for all as an independent country."
