The International Monetary Fund (IMF) has raised its growth forecast for the UK by 0.1 percentage points for 2025, projecting the economy will expand by 1.2 per cent this year and 1.4 per cent in 2026. The upgrade comes as part of the IMF's World Economic Outlook, which also revised global growth higher to 3 per cent for 2025 and 3.1 per cent for 2026, up from previous estimates of 2.8 per cent and 3 per cent respectively.
The IMF attributed the improved outlook to ‘front-loading’ of imports by countries rushing to ship goods to the United States ahead of President Donald Trump’s tariffs. This surge in trade, combined with lower-than-expected tariffs after initial announcements and improved financial conditions, has bolstered global economic activity. Germany and Italy also saw 0.1 percentage point upgrades for 2025, while Canada received a larger boost of 0.2 points for 2025 and 0.3 for 2026.
Despite the modest upgrade, the UK's growth rate remains low, drawing criticism from the Conservatives. Shadow Chancellor Mel Stride said: “Business confidence has collapsed all because of the chancellor’s reckless economic choices. You can’t tax your way to growth – we need to back British businesses and workers.” Chancellor Rachel Reeves defended the government’s record, stating the UK still has the highest growth in the G7, and highlighted investments through the ‘Plan for Change’ including city transport, affordable housing, and major projects like Sizewell C.
The IMF warned that risks remain, including a potential rebound in effective tariff rates, ongoing Middle East conflict affecting shipping, and elevated uncertainty. Conversely, growth could be further boosted if trade negotiations lead to lower tariffs and greater predictability, as well as technological advancements such as artificial intelligence. The chancellor faces a challenging autumn Budget, needing to fill a multi-billion-pound black hole while balancing tax rises and spending cuts.
