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UK economy to grow 1.6% in 2017: OECD

Press Association logoPress Association 7/03/2017

Britain's economy will grow by 1.6 per cent this year, the Organisation for Economic Co-operation and Development (OECD) says as it revised up its forecast amid resilient consumer spending following the Brexit vote.

In its interim economic outlook, the OECD boosted its prediction for 2017 by 0.4 per cent, compared to its estimate from November.

But it stuck to its forecast that growth would slow to one per cent in 2018, which is expected to be a key year in negotiations over the UK leaving the European Union.

The OECD warned growth would be hit by "uncertainty" about Britain's future trading relationship with the EU and rising inflation, which last week was pushed to a two-and-a-half-year high of 1.8 per cent by the collapse in the pound following last year's referendum.

It said: "In the United Kingdom, the pace of expansion in 2016 was lower than in previous years, despite support from resilient household spending, actions by the Bank of England and adjustment to the fiscal stance following the Brexit vote.

"UK growth is expected to ease further as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom's future trading relations with its partners."

The OECD also warned "rapid house price increases" in Britain could herald a future economic downturn.

"In advanced economies, some countries have experienced rapid house price increases in recent years, including Australia, Canada, Sweden and the United Kingdom.

"As past experience has shown, a rapid rise of house prices can be a precursor of an economic downturn.

"House price-to-rent ratios are at record highs in several countries and above long-term averages in many others.

"Although there has been a slower accumulation of household debt in recent years, mortgage-debt-to-income ratios remain high in many countries."

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