The Organisation for Economic Co-operation and Development has revised up its UK 2017 growth forecast due to a less severe impact from Brexit than it previously anticipated, although the agency still expects GDP to expand this year by less than predicted by the Bank of England.

In its latest Economic Outlook, the OECD projects growth of 1.6 per cent this year for the UK, up from the 1.2 per cent it forecast in November.

In February the Bank upgraded its central 2017 growth forecast to 2 per cent, on the back of stronger growth in the final quarter of 2016. It still expects Brexit to impose a drag on GDP growth in 2017 and 2018.

“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 said in its latest report.

2017 UK upgrade

OECD

The Paris-based agency added that the UK's 2016 growth of 1.8 per cent was lower than in previous years, despite a cut in interest rates from the Bank of England last August.

The OECD’s 2018 forecast for UK growth is unchanged at 1 per cent, which is lower than the rest of the G7 with the exception of Japan and Italy.

The Office for Budget Responsibility will unveil its own updated growth forecasts on Wednesday alongside the Chancellor's Budget.