The International Monetary Fund (IMF) has revised its growth forecast for the UK, predicting a stronger-than-expected expansion of 1.3% in 2026, up from the 1% forecast in July. However, the IMF warns that higher energy prices and interest rates could slow growth to 1.2% in 2027, as households and businesses face increased financial pressures.
Chancellor John Healey is preparing the UK's Budget, set to be announced on 28 October, amid surging government borrowing costs. IMF chief economist Silvana Tenreyro highlighted that the UK is leading G7 economies in managing its debts, with projections showing a significant reduction in annual borrowing from 2025 to 2031. The UK is also expected to have the lowest annual borrowing in the G7 by 2031.
The IMF noted that the global economy has shown resilience to the energy price shock caused by the US-Iran war, but warned of ongoing uncertainty. Despite this, the UK is forecast to have the second-fastest growing economy in the G7, alongside Germany. However, inflation is expected to remain above the Bank of England's 2% target, averaging 3.3% this year and 2.8% in 2027.
Economists and think tanks, including the Resolution Foundation, have called on Healey to address public finances while providing targeted support for households struggling with rising costs. Conservative shadow chancellor Andrew Griffith cautioned against further tax rises, warning they could slow growth and burden working people.