The UK economy will see the slowest growth of the largest developed nations next year, according to forecasts.
The Organisation for Economic Co-operation and Development (OECD) predicted that UK gross domestic product will rise by 1% in 2025.
This is below the rest of the G7 nations, which include Canada, France, Germany, Italy, Japan and the US.
The OECD, which is a globally recognised think tank, said the UK economy would be “sluggish” this year.
The organisation blamed the after-effects of a succession of interest rate rises in the UK for the lethargic performance.
It also warned that some elements of inflation remained high and that uncertainty over when the Bank of England might change interest rates might put people off investing.
The UK economy is now forecast to expand by 0.4% this year, a downgrade from the OECD’s previous projection for 0.7% growth.
It means that for this year only Germany will see slower growth, it said.
The OECD predicted that tax receipts in the UK would “keep rising to historic highs” of about 37% of GDP”.
The government has cut National Insurance twice since last year, totalling a 4% reduction. But the OECD said this “only partially offsets the ongoing fiscal drag from frozen personal income tax thresholds”.
Fiscal drag means that as a person’s salary rises, they can move into a higher income tax bracket.
The organisation also said that a government scheme to allow businesses to deduct the full cost of investing in machinery and equipment from their tax bill does “less than fully compensate” for an increase in corporation tax which rose from 19% to 25% this time last year.
But the OECD said that in the long-run these measures, as well as the government’s free childcare scheme, “could help to lower fiscal pressure”.