The UK economy is to suffer the biggest hit of all the G7 nations next year, according to a report from the Organisation for Economic Cooperation and Development (OECD).

The OECD forecasts that the UK’s GDP will reduce 0.4% next year and grow 0.2% in 2024. This is better than previous OECD predictions which has been for the economy to remain static.

The only other G7 economy to contract next year is Germany's. which will experience a smaller contraction of 0.3%.

Growth will be small in the majority of the G7 nations. Italy's GDP will grow 0.2%, the US will see 0.5%, France will experience 0.6% while Canada and Japan will see rises of 1% and 1.8% respectively.

The government's Energy Price Guarantee scheme will increase inflation, requiring hiked interest rates which will result in higher borrowing costs, said the OECD report.

Mathias Cormann, OECD Secretary-General, said:

‘The global economy is facing serious headwinds. We are dealing with a major energy crisis and risks continue to be titled to the downside with lower global growth, high inflation, weak confidence and high levels of uncertainty making successful navigation of the economy out of this crisis and back toward a sustainable recovery very challenging.

‘An end to the war and a just peace for Ukraine would be the most impactful way to improve the global economic outlook right now. Until this happens, it is important that governments deploy both short- and medium-term policy measures to confront the crisis, to cushion its impact in the short term while building the foundations for a stronger and sustainable recovery.’