STORY
The International Monetary Fund has raised its forecast for UK economic growth this year and backed Rachel Reeves’s approach to the public finances. In its latest assessment, the IMF increased its 2026 UK growth forecast from 0.8% to 1.0%, citing stronger than expected economic data and a solid performance in the first quarter of the year.
The Fund said the Government should continue with its deficit reduction plans, while recognising the need to support growth. The assessment gives the Chancellor a boost at a difficult political moment, with the Government facing pressure over borrowing costs, the cost of living and wider uncertainty linked to the conflict in the Middle East. Reuters reported that Reeves said the IMF’s support showed the Government’s strategy was working and warned against putting economic progress at risk.
The IMF also warned that the UK still faces significant risks, including high energy prices, inflationary pressure and political instability. It said inflation could rise to just under 4% by the end of the year before returning to the Bank of England’s 2% target in 2027, provided energy prices stabilise. The Fund urged ministers to avoid unfunded or broad-based support measures, saying any help with living costs should be temporary, targeted and affordable.