IMF lifts UK 2026 growth forecast but warns of slowdown in 2027
The IMF raised its projection for UK GDP growth in 2026 to 1.3% but cautioned that higher energy prices and interest rates could reduce growth to 1.2% in 2027.
The International Monetary Fund said the United Kingdom’s economy is expected to expand by 1.3% in 2026, an upgrade from the 1% forecast made in July, before slowing to about 1.2% in 2027. The revision reflects the IMF’s view that global economies have shown resilience to the energy-price shock linked to the conflict between the United States and Iran, though it described the overall fallout as “highly uncertain.”
"As you know, the UK has already started the consolidation process and it is the country that basically stands out, along with India," IMF chief economist Silvana Tenreyro told BBC News at the launch of the World Economic Outlook.
The fund highlighted that the UK is on track to stabilise its national-debt ratio, projecting a reduction in annual borrowing of nearly four percentage points of GDP between 2025 and 2031 – a pace faster than any other G7 member. It also expects the UK to have the lowest annual borrowing among the G7 by 2031 and to lock in longer-term debt at lower rates.
"Britain's economy is showing strong international resilience," Chancellor Jeremy Healey said, acknowledging that wars in the Middle East and Europe are affecting people worldwide.
The IMF warned that rising energy costs and higher long-term interest rates could weigh on household spending and business investment, dragging growth down in 2027. Inflation is projected to average 3.3% this year and remain above the Bank of England’s 2% target, at 2.8% in 2027.
The Resolution Foundation urged the chancellor to pair debt-reduction efforts with targeted cost-of-living support for households struggling to heat their homes. Conservative shadow chancellor Andrew Griffith warned that any move toward additional tax rises in the upcoming budget could “slow growth” and burden workers.
The IMF’s outlook arrives as the UK prepares its first budget under Prime Minister Andy Burham, with policymakers facing the challenge of balancing fiscal consolidation against the need for household assistance amid persistent price pressures.