The International Monetary Fund has slashed its growth forecast for the UK, warning that Donald Trump's tariffs have unleashed a 'major negative shock' on the world economy. The UK is now expected to grow by 1.1% in 2025, down from the 1.6% predicted in January.
In its latest World Economic Outlook, the IMF cut its global growth forecast to 2.8% for this year – 0.5% weaker than its January projection. The US forecast was also downgraded sharply, from 2.7% to 1.8%. The IMF said the sharp increase in tariffs and uncertainty since 2 April would lead to a significant near-term slowdown.
Chancellor Rachel Reeves, travelling to Washington for the IMF spring meetings, said she would be 'defending British interests and making the case for free and fair trade'. She highlighted that the IMF still expects the UK to be the fastest-growing European G7 economy in 2025.
The IMF attributed the UK downgrade partly to 'domestic factors', including higher government borrowing costs and weaker consumer spending due to higher inflation driven by rising energy bills. It warned that companies globally are likely to cut investment and spending in response to trade uncertainty, and that emerging economies may face particular strain from tighter financial conditions and reduced aid.
The IMF called for coordinated action to reduce trade tensions and restructure low-income countries' debts, but acknowledged the challenge given the US 'America first' approach. It also flagged risks of strong currency market volatility, especially for emerging markets.
