OECD warns of risks to UK economy due to tight fiscal policy

The Organisation for Economic Co-operation and Development (OECD) has raised concerns about the state of the UK economy. Experts from the group warn that overly strict fiscal rules implemented by Chancellor of the Exchequer Rachel Reeves pose a threat to the country's economic stability.

The core issue lies in the extremely limited fiscal buffer, approximately 9.9 billion pounds ($13.4 billion). The OECD considers this amount insufficient to shield the economy from unexpected shocks. Against this backdrop, the group has downgraded its UK economy growth forecast to 1.3% for this year and 1% for 2026, significantly below government projections.

OECD analysts highlight that debt servicing costs continue to exert persistent pressure on public finances, creating substantial economic risks. In case of a crisis emerging, the government would face difficult choices between raising taxes or cutting spending, making the situation worse.

The group recommends UK policymakers revise their approach to fiscal policy. Establishing a more robust contingency fund, the OECD suggests, would enhance the government's capacity to withstand potential economic disruptions.