The OECD has upgraded its UK growth forecast for 2026 from 0.9% to 1.1%, citing newly announced government support measures under Prime Minister Andy Burnham, who took office on 20 July. Inflation expectations were slashed from 3.7% to 3.1% for 2025. Chief Secretary to the Treasury Emma Reynolds seized on the numbers, noting the UK posted the fastest G7 growth in the first half of the year. The headline is designed to reassure. The same morning's PMI data tells a different story. The flash UK composite output index fell to 51.7 from 52.5 — a three-month low. S&P Global's Chris Williamson translated the survey into a blunt number: the economy is growing at a 0.1% quarterly rate. Input price inflation accelerated to its highest since June, driven by energy, fuel, and raw material costs. New business volumes fell for the first time since July. The global backdrop is the Iran war, which the OECD says the world economy has weathered better than expected — global growth nudged up 0.1 points to 2.9%. But the cushioning mechanisms are temporary: strategic oil stockpile releases, China cutting energy imports, and a partial switch to coal. Oil dipped below $100 on hopes of a US-Iran agreement, but the OECD warned that recent price resurgences pose near-term risks. The UK's economic outlook remains, in the OECD's own words, "heavily dependent" on a durable resolution to the Middle East conflict. Sterling slid below $1.33 as the dollar strengthened on hawkish Fed rhetoric. Ebury's Matthew Ryan flagged the contradiction facing the Bank of England: falling oil prices should undercut the case for rate hikes, but the PMI's price gauges suggest inflation isn't retreating fast enough. The result is a policy trap — growth too weak for hikes, inflation too sticky for cuts. On the corporate side, Legal & General is cutting 1,000 jobs — a tenth of its workforce — by mid-2027 under CEO António Simões's simplification drive. The investment management division overseeing £1.2tn in assets is excluded, having its own restructuring underway. Meanwhile, the Co-op reported losses widening to £45m, still recovering from last year's cyber attack that emptied shelves for weeks. Group sales rose 2.4% to £5.6bn, but grocery growth trailed inflation. The Co-op's interim chief executive Kate Allum delivered the most revealing quote of the day: the company needs government to "create an environment where we have confidence and certainty to invest." Consumer confidence remains weak, cost of living is members' top concern, and the retailer had to invest in price cuts and promotions to win back customers lost during the hack. This is the ground-level reality beneath the OECD's upgraded forecast. IMF Managing Director Kristalina Georgieva added the fiscal warning: global debt levels have been rising "like a staircase not to heaven," and governments need courage to contain servicing costs. With Burnham's budget approaching next month and borrowing costs already elevated by bond market turmoil, the tension between spending promises and fiscal constraints will define whether the OECD's optimism was warranted or premature.
