IMF raises UK growth forecast in boost for chancellor – business live
The IMF has raised its forecast for UK economic growth this year, offering a boost to Chancellor John Healey ahead of his first budget on 28 October. It expects growth to ease next year as higher energy prices and interest rates weigh on household spending and business investment.
The Fund now expects UK GDP to grow by 1.3% in 2026, up 0.3 percentage points from its July forecast, then by 1.2% in 2027, down from 1.3%. It forecasts average inflation of 3.3% this year and 2.8% next year, with core inflation not returning to the 2% target until late 2027. The upgrade follows stronger-than-expected growth in the first half of 2026, while the IFS has warned of £35bn in future spending pressures.
- IMF lifts UK growth forecast to 1.3% this year.
- Growth is expected to slow to 1.2% in 2027.
- Inflation and £35bn in spending pressures cloud the outlook.
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The International Monetary Fund is a global organisation that monitors the health of the world's economies. Its forecasts about how fast an economy will grow are closely watched by policymakers and investors because they influence decisions about spending and investment.
Chancellor John Healey is responsible for managing the UK's public finances and will present his first budget on 28 October. Good economic news before this event is politically valuable, as strong growth can provide room for new spending or tax policy changes without worsening the government's borrowing figures.
The IMF now expects the UK economy to grow by 1.3% this year, faster than previously forecast, but anticipates growth will slow to 1.2% next year as higher energy prices and interest rates make households and businesses more cautious about spending. The fund also expects inflation to decline gradually, though the process will take some time.
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The strongest fair case each way — we don't pick a winner.
The case for
The IMF's upgrade reflects genuine economic outperformance in the first half of 2026, indicating the UK economy possesses underlying resilience and momentum. This represents a credible reassessment from a major international institution, suggesting the economic foundations are sounder than previously thought and that growth-supporting policies are delivering tangible results. Such positive momentum strengthens confidence and provides a stronger basis for forward-looking economic policy decisions.
The case against
Whilst the upgrade is welcome, a 0.3-percentage-point improvement is modest, and the underlying picture remains challenging: growth is forecast to decelerate in 2027, inflation remains sticky above target until late 2027, and the IFS has identified £35bn in future spending pressures. Higher energy prices and interest rates will constrain household spending and business investment, suggesting the recent momentum may prove temporary, and the government should exercise fiscal caution rather than treat this as licence for expansionary policy.