The International Monetary Fund (IMF) predicts that the UK economy will grow slightly more than previously forecast in 2025. In its annual review, the IMF expects growth of 1.2% this year and 1.4% in 2026, a minor upgrade from April’s downgraded forecast of 1.1%.
The revision follows stronger-than-expected performance in the year’s first quarter, driven by higher consumer spending and business investment. However, these gains came before new US import tariffs and UK employer tax increases were introduced in April, which could dampen future momentum.
The IMF cited high global uncertainty, market volatility, and pressure on day-to-day spending as key challenges for Chancellor Rachel Reeves.
While it welcomed Government reforms to planning and infrastructure – provided they’re fully implemented – it urged discipline on tax and spending. The Chancellor’s fiscal rules, which the Government insists are “non-negotiable”, require day-to-day costs to be covered by tax revenue and aim to reduce debt as a share of GDP by 2029/30.
The IMF suggested streamlining fiscal oversight, recommending the Office for Budget Responsibility (OBR) produce just one annual forecast, rather than two.
Inflation remains another concern. Although previously expected to fall to 2.2% by 2026, inflation unexpectedly rose to 3.5% in April. The IMF predicts it won’t return to target levels until late 2026.
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