The UK has risen in the rankings of a group of wealthy nations to have the joint-second highest economic growth for this year, a think tank has predicted.

The economy is now expected to grow by 1.1%, the same rate as Canada and France, but behind the US.

The Organisation for Economic Co-operation and Development (OECD) previous growth estimate in May placed the UK last of a group of advanced economies, known as the G7.

Chancellor Rachel Reeves welcomed the faster growth figures, which will help reinforce the more upbeat tone she sought to strike in her speech to the Labour Conference.

She is facing the twin challenge of managing expectations ahead of the Budget next month by explaining how tough times lie ahead, while attempting to paint a positive picture to encourage investment.

“Next month’s Budget will be about fixing the foundations, so we can deliver on the promise of change and rebuild Britain,” Reeves said.

The OECD, which is a globally recognised think tank, said that economic growth had been “relatively robust” in many countries, including the UK.

But it added: “Significant risks remain. Persisting geopolitical and trade tensions could increasingly damage investment and raise import prices.”

While the OECD’s prediction for the UK has improved for this year, it is only set to enjoy joint-fourth fastest growth in 2025, at 1.2%, ahead of only Germany and Italy.

The UK is also still projected to see consumer prices rise at a faster rate than other G7 nations.

It is set to rise by 2.7% this year and 2.4% next year, the OECD forecast.

The OECD’s economic estimates, which are released twice yearly, aim to give a guide to what is most likely to happen in the future, but they can be incorrect and do change.

They are used by businesses to help plan investments, and by governments to guide policy decisions.

The OECD has prescribed a “carefully judged” reduction in interest rates and “decisive” action to bring down debt to allow more room for governments to react to any future economic shocks.

Stronger efforts to contain government spending and raise more revenue were key to stabilising debt burdens, it argued.

Many wealthy countries are facing ageing populations, the challenges of climate change, and geopolitical pressure to raise defence spending.

That is all in the wake of the financial crisis 16 years ago and more recently the Covid pandemic, which increased government borrowing and built up higher levels of debt.

However, not all economists agree that bringing debt down should be the policy priority. Some would like to see borrowing rise for a time, which they argue would boost growth and reduce debt over the longer term.

The summer is often choppy and this year was no exception. Stocks were near all-time highs at mid-year with volatility close to all-time lows.

August then saw the worst one-day sell off since 2020 and early September the worst week since 2022.

The zig-zag pattern is continuing, with investors worried about the risk of recession in the US. With global growth slowing and inflation cooling off, we are in a reflation phase, in which central banks usually lower interest rates and government bonds do well.

It’s a harder call for stocks.

If a recession is in the offing, the first Federal Reserve rate cut can signal the start of a bear market. If growth remains firm and rates are cut for inflation reasons, it can be bullish. Time will tell. In the meantime, we have a broadly neutral view on stocks while favouring bonds over commodities.

Most likely, stocks will come out of the summer doldrums on a positive footing, but things may get worse before they get better

Averages can hide a lot of information but September is historically the worst month of the year for stocks, with returns falling short of cash by 1.7% since 1986. Over the last five years, stocks have underperformed cash on average by 3.5% in September.

We put seasonal weakness down to the fact it’s hard for investors to get a good take on earnings trends during the quieter summer months and market liquidity isn’t great.

The business cycle has been particularly hard to read this year, with the post-pandemic swings in growth and inflation behind us.

The onset of Covid-19 was like a rock thrown into the pond and the waves are only just settling. Global growth has been steady this year, with a strong US economy making up for softness elsewhere.

Averages can hide a lot of information but September is historically the worst month of the year for stocks

Meanwhile, inflation is back in a range consistent with central bank targets. Investors were hoping central banks would cut rates for inflation reasons, but a run of weaker manufacturing data and US jobs reports is testing nerves.

We wouldn’t be surprised to see further volatility in the near term, especially with a contentious and close fought US election in the background. That said, our base case is that, true to seasonal form, stocks will rally into the New Year on the back of Fed rate cuts and more reassuring US data.

Investor sentiment can be a useful tool for timing moves back into stocks. Three times in the last year, we’ve seen our composite sentiment indicator move into overly bearish territory and, each time, the market has rallied.

In October and April, the sell-off was due to geopolitical risk and, in August, on concerns around the health of the US economy and a surge in the yen that triggered a disorderly unwind of carry trades.

The business cycle has been particularly hard to read this year, with the post-pandemic swings in growth and inflation behind us

Stocks saw four weeks of declines with volatility spiking to the second highest level since the global financial crisis. Depressed investor sentiment again signalled the lows and markets recovered quickly.

For active investors who can be nimble, volatility can be an opportunity, but we’d trade equity exposure around a neutral position until we know more.

For now, we have higher conviction on a positive view on government bonds and a negative view on commodities. We don’t currently expect a US recession, as service sector activity remains strong and interest rates have been on hold rather than rising.

Most likely, stocks will come out of the summer doldrums on a positive footing, but things may get worse before they get better.

Trevor Greetham is head of multi asset at Royal London Asset Management 

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Israel intercepted a Hizbollah missile aimed at the Tel Aviv area on Wednesday morning, triggering air raid sirens in the coastal city from the Lebanese militant group’s first ballistic missile attack on the country.

Hizbollah said the Qader 1 ballistic missile, which was launched after Israel’s intense bombardment of Lebanon killed more than 500 people this week, targeted the headquarters of Israeli intelligence agency Mossad on the outskirts of Tel Aviv.

The Israeli military said it had intercepted the ballistic missile, which is heavier, more destructive and longer range than the rockets Hizbollah usually fires at the country. It also claimed to have struck the launcher from which the missile was fired, located in the Nafakhiyeh area in southern Lebanon.

Israel is bracing for a step up in Hizbollah fire after it launched heavy raids on the militant group’s strongholds across Lebanon on Monday and Tuesday, pummelling its weapons stores and killing senior commanders. Israeli warplanes have hit more than 3,000 Hizbollah targets so far this week, the Israel Defense Forces said.

The escalating cross-border violence has sparked alarm that Israel and Hizbollah are heading for all-out war, triggering an exodus of residents from southern Lebanon in anticipation of further violence.

Lebanese authorities have put the death toll at 564 from the bombardment so far. This included a strike on a Hizbollah-controlled area of southern Beirut that killed the group’s missiles division chief Ibrahim Kobeissi on Tuesday.

Israel has pledged to continue the military action until 60,000 citizens displaced from northern areas by months of cross-border fire can return home. Hizbollah has been directing volleys of rockets at northern Israel since shortly after October 7 in support of Hamas in Gaza.

Hizbollah’s barrages have increased to about 100 to 200 rockets a day in response and the group has fired deeper into Israel than before. Most of its projectiles have so far been intercepted by Israel’s air defences, but the group is thought to have large stockpiles that it has not yet used.

More than 3,000 people were injured and 37 were killed across Lebanon last week when Hizbollah’s communications devices suddenly detonated en masse. The group blamed Israel for the assault. Israel has not directly confirmed or denied the blasts.

Hizbollah said it used the ballistic missile against the command centre of the Israeli intelligence agency because it was “responsible for the assassination of leaders and exploding the pagers and walkie-talkies”.

Hizbollah also revealed it had used “Fadi” rockets in its attacks this week for the first time. The rockets — named after a Hizbollah commander killed in 1987 whose brother was also killed by Israel in January this year — have a longer range, at 70km to 100km, than rockets used so far by the group in the fighting since October.

The Fadi-1 and Fadi-2 have an explosive payload of 83kg and 170kg respectively, according to Israel’s Institute for National Security Studies. It described them as medium-range “inaccurate ballistic missiles, launched from mobile platforms” that Israel’s Iron Dome is able to intercept. The militant group claimed to have also used the more powerful Fadi-3 rocket for the first time on Tuesday.

Hizbollah has much more substantial missiles in its stockpile that it is yet to use, the INSS said, such as the Zelzal missile, which it said has a range of 200km and carries up to 600kg of explosives.

CELEBRITY interior designer Celia Sawyer has won her planning dispute over a luxury sunroom she built without permission in the garden of her Sandbanks home.

The star of Channel 4’s Four Rooms had the glass-walled building with a retractable roof installed in 2020.

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The sunroom backs on to Poole Harbour and even has a small sandy ‘beach’ in front of it with sunbeds on.

Mrs Sawyer, known as Mrs Bling, has regularly posted pictures on Instagram of herself lounging in the 21ft by 15ft room wearing a bikini or thigh-splitting skirts.

Last year the 58-year-old became embroiled in a row with nextdoor neighbour Neil Kennedy over a first floor balcony he had built without planning permission.

She claimed that it breached her privacy as he was able to look down to the bottom of her garden where she sunbathes.

Mrs Sawyer and her husband Nick lost out in the dispute when BCP Council granted Mr Kennedy retrospective planning permission that allowed him to keep his balcony and other alterations he had done.

Afterwards the council received an anonymous tip-off informing them that Mrs Sawyer’s sunroom had been built without permission.

Officials contacted her and told her she had to submit a retrospective planning application for it.

She faced having to tear it down if it was rejected.

A council case officer has now granted her planning approval saying they were satisfied the building did not cause any harm to the area.

Planning officer Emma Woods said the sunroom wasn’t visible from the street and can only be seen from the water and neighbouring properties.

She said the sunroom is “open in nature” and “does not appear at odds with its surroundings” pointing out that many waterside properties have outbuildings like boat houses.

She noted it is about 3ft from Mr Kennedy’s property but it is not overbearing due to its modest height and open nature.

She said: “The design retains a sense of openness and is considered to fit comfortably with the established character and appearance of this stretch of the shoreline.

“Overall it is considered that the development respects the amenities and privacy of the occupants of the neighbouring properties.”

The council only received one representation from a neighbour who said the sunroom was well designed and made a positive contribution to this part of the harbour.

Mrs Sawyer was granted the retrospective planning application with condition that the sunroom must not be used for habitable accommodation.

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Good morning from Liverpool. One reason why this has been an unusual Labour party conference is this is an unusual moment in British politics. We have just had an election that replaced a Conservative government with a Labour one — in any case something that doesn’t happen all that often — and a party conference that has taken place after the King’s Speech but before the first Budget, something I don’t think has ever happened before.

As a result, most ministers’ speeches have been pretty uneventful, as was Keir Starmer’s yesterday (other than him saying the word “sausages” rather than “hostages” in his speech).

What the world needs now

One reason why Keir Starmer’s declaration that “things will get worse before they get better” has landed badly, at least in regard to his and the government’s approval ratings, is that it simply wasn’t clear to anyone really what needed to “get worse”.

In 2010, David Cameron and George Osborne’s argument was that what needed to get worse was some public services: some would have to do more with less money and some things would stop entirely. There was clearly a recognisable theory of change that enjoyed the support of his party and some outside of it.

The most significant thing Starmer did in his speech was to give the first indications of what “worse” actually might mean:

So if we want justice to be served some communities must live close to new prisons.

If we want to maintain support for the welfare state, then we will legislate to stop benefit fraud. Do everything we can to tackle worklessness. 

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If we want cheaper electricity, we need new pylons overground otherwise the burden on taxpayers is too much.

If we want home ownership to be a credible aspiration for our children, then every community has a duty to contribute to that purpose.

If we want to tackle illegal migration seriously, we can’t pretend there’s a magical process that allows you to return people here unlawfully without accepting that process will also grant some people asylum.  

If we want to be serious about levelling-up, then we must be proud to be the party of wealth creation. Unashamed to partner with the private sector.  

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And perhaps most importantly of all, that just because we all want low taxes and good public services that does not mean that the iron law of properly funding policies can be ignored, because it can’t. 

One thing to note here is that a lot of these involve building things and the attendant disruption that comes with them, and none of them really lay the groundwork for further reductions in what the state currently does more broadly.

Just before flying to New York, the prime minister reiterated to BBC Today that listing these changes was about staving off the “politics of easy answers”: “Obviously there are always considerations about where you put anything, but this general idea — we’ve had it from the last government in spades — where you promise more houses, but then everybody can say ‘but not near me’, cheaper electricity but we can’t build the pylons, more people to prison but we haven’t built the prisons.”

British politics is going to continue to be in an odd state of phoney war between now and the Budget on October 30. But I think we should all expect to see in that Budget quite a lot about building and infrastructure.

Now try this

Because I am deeply misanthropic, there comes a time during party conference season when I am seized by a desire to spend the evening in my own company watching a film. I saw His Three Daughters again, which is now on Netflix, and really is a terrific movie.

Top stories today

• Struggling on | Troubled intercity rail operator Avanti West Coast will not be stripped of its contract early by the UK government, according to people with knowledge of the plans. 

• ‘For women, prison isn’t working’ | A new “women’s justice board” will be set up to cut the female prison population in England and Wales as part of a longer-term push to reduce the number of women’s jails, the justice secretary has said.

• SNP under pressure | The number of homeless households in Scotland has hit a 12-year high as a widening housing crisis across the UK leaves record numbers in insecure accommodation.

• Drab deal? | Corporate chiefs will be asking Labour to refund them for a £3,000-a-head business day at the party’s conference. The Times’s Geraldine Scott and Aubrey Allegretti heard from three companies that they would be asking for their money back after they got “minimal time” with ministers and were “talked [at] from the stage for four hours”.

• Little rabbit | Rachel Reeves is considering boosting childcare funding to fuel growth, as a rabbit in her Budget, reports Bloomberg. According to people familiar with the matter, she sees parents returning to work as a way to boost growth and improve productivity, though one person warned she is yet to sign off any spending plans for October 30 and is unlikely to approve large commitments.