Tax rises and tighter spending to hold back UK growth, OECD says

The Bank of England (BoE) has announced plans to ease capital requirements for high street banks for the first time in a decade, reducing the reserve lenders must hold to stimulate lending to households and businesses. This decision comes amid ongoing discussions about the independence of the Office for Budget Responsibility (OBR) and the implications of budget leaks.

Prof. David Miles, an official from the Office for Budget Responsibility (OBR), testified before MPs that Chancellor Rachel Reeves did not mislead the public regarding the challenges facing the UK ahead of the upcoming Budget. He stated that her messaging was consistent with the economic situation she encountered.

Bitcoin halted its recent decline, and stocks showed a cautious rebound as the global flight from risky assets began to ease. The Bank of England adjusted its estimate for the Tier 1 capital requirements for UK banks to approximately 13% of risk-weighted assets, while also warning of potential risks associated with hedge fund strategies like the basis trade.

Stifel Financial Corp. has announced plans to shut down its UK-based equities trading business, leading to significant staff cuts, as reported by sources familiar with the situation. This decision reflects a strategic pullback in the company's operations in the UK market.

The OECD has projected that the UK economy will experience faster growth in 2026, alongside a decrease in inflation rates. This forecast reflects a positive adjustment in the economic outlook, influenced by recent budget measures aimed at stimulating growth.

The OECD has indicated that rising tariffs and the rapid growth of artificial intelligence (AI) could challenge the resilience of global economic growth. This assessment highlights the potential risks posed by trade tensions and technological advancements that may disrupt established economic patterns.

The OECD has raised its growth forecast for the UK in 2026, attributing this positive outlook to the anticipated impacts of the recent budget measures. This adjustment comes amid ongoing discussions about the UK’s economic stability and fiscal policies.

The OECD has indicated that major central banks in leading economies are unlikely to implement further rate cuts in the coming year, signaling a shift in monetary policy as economic conditions evolve. This forecast reflects the organization's assessment of the current economic landscape and the limitations faced by central banks in stimulating growth through lower interest rates.