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Brexit-hit Britain is moving into the economic slow lane, falling behind even Italy, according to an authoritative new report today.

The UK’s economy will limp ahead by one per cent next year, predicted the Organisation for Economic Co-operation and Development, down from 1.8 per cent in 2016.

This would be the most sluggish growth of the G7 group of major economies which include the US, Japan, Germany, France, Italy and Canada.

Even Italy, in the grip of a banking crisis, blighted by high youth unemployment and dogged by a chaotic political system, is now forecast to grow more strongly than Britain.

OECD chief economist Catherine Mann stressed: “Brexit will represent a serious (economic) shock.”

The grim report came as:

A new Ipsos MORI poll for The Standard showed 52 per cent of people in the UK expect economic conditions to get worse over the next year, with just 21 per cent believing they will improve.

European agriculture commissioner Phil Hogan took a swipe at Foreign Secretary Boris Johnson branding him as “completely out of the loop” on Brexit and a “diminished figure” in the Government.

Official figures showed store prices rising sharply in August, with non-food stores and non-store retailing recording their highest year-on-year price growth for more than 25 years, at 3.2 per cent and 3.3 per cent respectively.

With inflation at 2.9 per cent outstripping many wage rises, millions of households across the UK are being hit by the longest squeeze on living standards for three years.

However, Sterling rose this morning following better than expected volume retail figures, with the quantity bought in the retail sales industry rising by 2.4 per cent, compared to a year ago, the 52nd consecutive month of year-on-year growth.

Economists say the retail sales figures may well have been boosted by the slump in the Pound following the Brexit vote leading to more Britons holidaying in the UK this summer and more foreign tourists.

But they warned that the Bank of England could start raising interest rates in November from their historic low of 0.25 per cent.

Keeping the public sector pay cap could lead to recruitment shortages in London and the South East, the Institute for Fiscal Studies warned.

In an interim report today, the OECD left its June forecast for the UK economy for 2018 unchanged but it dramatically revised up its prediction for Italy by 0.4 per cent to 1.2 per cent.

It also nudged up its expectations for the German and French economies by 0.1 per cent to 2.1 per cent and 1.6 per cent respectively.

This means that the eurozone - which has lagged behind Britain - is now forecast to enjoy buoyant growth at 1.9 per cent next year - nearly double the UK’s rate.

“In the United Kingdom, GDP growth has continued to slow with an easing of consumption and investment growth,” said the OECD.

“A further slowing is expected in 2018, while uncertainty remains over the outcome of negotiations around Brexit.”

The Paris-based economic experts highlighted that the unemployment rate had fallen to below 4.5 per cent in the UK but stressed that weak productivity and real wage growth persist.

“The depreciation of the sterling has modestly improved export prospects but also pushed up inflation, dampening purchasing power and private consumption,” it added.

Conservative MP Nicky Morgan, chairwoman of the Commons Treasury committee, stressed: “We have been hearing for some time that business investment has been slowing down and today’s OECD report bears that out and crystallises the fears that many of us had about Brexit dragging down our economy.”

Liberal Democrat leader Sir Vince Cable added: “Brexit is set to turn Britain into the sick man of Europe again.”

Shadow Chancellor John McDonnell urged the Government to change course on the economy and highlighted the OECD warning that the UK is still at risk of a bubble in the housing market.

But former Cabinet minister and Brexiter John Redwood believes the one per cent forecast for the UK next year “seems a bit low”.

He added: “We know that these people have got their forecasts comprehensively wrong immediately after Brexit.”

A Treasury spokesman said: “Our economy has grown continuously for four years and a record number of people are in work.

“This is a strong record but we are not complacent. We must continue our focus on restoring productivity growth which is the only sustainable way to deliver higher wages and higher living standards for people across the country.”