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OECD data confirms Pound Sterling's growth problem with a 1.0% growth forecast pencilled for next year.
Economic growth is the ultimate arbiter of a currency's strength: outperformance in the economy inevitably delivers outperformance in the currency.
For two years running - in 2023 and 2024 - Pound sterling scored second place in the G10 currency performance tables, underpinned by the UK's consensus-busting economic growth record.
But this changed in 2025, with both the currency and economy sliding down the league.
And now the Organisation for Economic Co-operation and Development (OECD) predicts the country will be stuck in the slow lane as it predicts a 1.0% GDP expansion for 2026, an outcome that would almost certainly ensure ongoing GBP underperformance.
"The OECD's forecast growth for the UK will barely sustain our ageing population; never mind delivering an upgrade in living standards. Worse still, the forecast of the highest inflation in the G7 will quickly eat away at any minor benefits we do feel," says Tom Clougherty, Executive Director of the Institute of Economic Affairs, responding to the OECD Economic Outlook report.
The OECD said the growth slowdown would be caused by a "tighter fiscal stance", reflecting either higher taxes or lower government spending.
We know the government has not cut spending, therefore the downgrade will lie with the recent ratcheting up in taxes. And more of the same is on the menu: the government will need to fill a hole that is approximately £30BN at its November budget, and the kites being flown by the Treasury so far suggest any sign of spending restraint.
Kite flying refers to the Treasury leaking potential budget announcements to see what will land favourably with the public. It also softens the public for the eventual announcement.
However, this creates an air of uncertainty that stifles investment. The OECD also blamed politically linked uncertainty for the UK's projected 1.0% growth disappointment.
"Businesses across the board are looking ahead to the November Budget with hope that it delivers meaningful action to ease cost and regulatory pressures. Without that clear policy direction, confidence will continue to ebb and firms will find it increasingly difficult to invest, hire and grow," says Ben Jones, Lead Economist at the CBI.
For the pound, uncertainty also triggers underperformance: the pound to euro exchange rate is 5.23% lower this year, having risen in the two previous years.
The pound to dollar exchange rate is higher by 7.87%, but this is entirely a function of USD weakness. When comparing against the Dollar, relative performance is key, and we note the GBP/USD's advance lags comparable European currencies. For example, SEK/USD is 18% higher, CHF/USD is 15% higher.
Clougherty says the disappointing economic trajectory facing the country is a direct result of government policy to raise the cost of employment and make doing business more expensive.
"It's time for the Government to get serious about growth. The Budget provides an opportunity for the Chancellor to fix the public finances and reform our tax system to lift the burden on the engine of the economy and boost economic dynamism," he says. "Radical action in November combined with a doubling down on planning and regulatory reform, the kind of which is talked up but rarely acted on, is the only way out of this mess."
The September PMI survey released Tuesday disappointed, showing the economy looks to have lost steam in the third quarter, with a Composite PMI reading of 51, down from 53.5 in August.
Roman Ziruk, Senior Market Analyst at Ebury, says the September PMI data provides further confirmation of the troubling state of the British economy.
Above: UK employment has been steadily falling since the new government took power.
"Fresh economic concerns are weighing on the pound, which is underperforming most of its G10 peers," he explains. "Given concerns over higher taxes, the outlook for the British economy in the near term is mired in uncertainty and not very encouraging."
According to TD Securities, "while the UK was the strongest growth performer in the G10 in H1, today's PMIs suggest that growth momentum is slowing into the autumn."
Fading outperformance in the economy has corresponded with steady currency underperformance.
For GBP to rediscover its winning ways, it needs the economy to start outperforming. A steady business-friendly budget is therefore required from Chancellor Rachel Reeves this November.