The UK economy will slow in the coming years as Brexit uncertainty hampers growth and consumers become more cautious in the face of higher prices and lower wages, according to the OECD.

The Organisation for Economic Co-operation and Development stood by its economic forecasts for UK gross domestic product (GDP), predicting it to slow from 1.8% to 1.6% this year.

The Paris-based think-tank also stuck to its prediction that the pace would slow to 1% next year as Brexit negotiations intensify and rising inflation coupled with stuttering wage growth dampens consumer spending.

It also warned that weaker growth could drive the unemployment rate above 5%.

Labour market figures for January to March published by the Office for National Statistics last month showed unemployment fell by 53,000 to 1.54 million - a rate of 4.6% - the lowest since the summer of 1975.


Inflation climbed to 2.7% in April - its highest level for nearly four years.

In real terms - taking into account inflation - wages fell by 0.2% in the first three months of 2017, the first time there has been a decline for two-and-a-half years.

The Bank of England said last month that its expects the cost of living to peak at 3% later this year.

But while the OECD expects the squeeze on household budgets to intensify, it said it anticipated consumers to dip into savings to keep spending in the face of higher inflation.

"Private consumption growth is projected to slow, as higher inflation holds back real earnings, but a weaker growth outlook should mitigate the extent of price pressures in the economy," its report said.

"Also, households are expected to continue to support their consumption by further reducing their saving rate.

"Business investment is projected to contract amid the large uncertainty and because of lower corporate margins.

"Weaker growth could push the unemployment rate above 5%."

It said Britain's exit from the European Union remained the "major risk" for the UK economy, the impact of which hinged on whether strong trade links with the EU remain intact following negotiations.

However, it backed Britain's exports to lift growth, boosted by a weaker pound and an improving global economy.

The OECD said the world economy was on course for a "modest pick up", with global GDP expected to reach 3.5% for this year and 3.6% in 2018.