UK growth forecast upgraded to 'modest' by OECD which says Brexit talks should focus on open EU trade

The global economy is forecast to expand by 4 per cent but markets face risks from rising oil prices and trade tensions

The OECD’s forecast for Britain has improved since last year (Reuters)

The UK’s economic growth forecast has been upgraded by the Organisation for Economic Cooperation and Development, but the group warned that the country is still facing “large uncertainties”.

The OECD raised its growth forecast to 1.4 per cent for 2018, up from an estimate of 1 per cent last year. The economy is expected to grow by 1.3 per cent next year.

According to the OECD, projections for growth remain modest “owing to high uncertainties about the outcome of Brexit negotiations”.

It added that financial authorities should “stand ready” to ramp up productivity-enhancing measures on investment if growth weakens significantly ahead of Brexit.

In particular, the OECD said, the UK should increase spending on education and training for low-skilled workers, in order to increase productivity and enhance inclusiveness.

“From an economic point, Brexit negotiations should aim at preserving open trade with the European Union and high access for financial services to EU markets,” the group added.

The OECD said the global economy overall is experiencing stronger growth, driven by a rebound in trade, higher investment and more jobs being created, with the pace of growth expected to “hover near 4 per cent” over the 2018-19 period.

However, global markets also face “significant risks”, including trade tensions, financial market vulnerabilities and rising oil prices.

“The economic expansion is set to continue for the coming two years, and the short-term growth outlook is more favourable than it has been for many years,” said OECD secretary-general Angel Gurria.

“However, the current recovery is still being supported by very accommodative monetary policy, and increasingly by fiscal easing. This suggests that strong, self-sustaining growth has not yet been attained.

“Policymakers need to put greater focus on structural policies to boost skills and to improve productivity to achieve strong, sustainable and inclusive growth.”