The UK economy is expected to expand more than previously thought in 2026 before facing a slowdown next year, the International Monetary Fund has said. In its latest World Economic Outlook, the IMF said the UK would grow by 1.3% this year, an upgrade from its July forecast of 1%. The revision comes as economies worldwide have proved more resilient to the energy price shock caused by the US-Iran conflict, though the organisation cautioned that the economic consequences of the war remain "highly uncertain".
Chancellor John Healey said the government would look to "provide some breathing space" for households in the Budget, which will be announced on 28 October. Healey is finalising the tax and spending plans for Andy Burnham's government against a backdrop of surging government borrowing costs, placing pressure on him to ensure the plans are credible with financial markets. The UK relies on these markets to borrow money.
IMF Chief Economist Silvana Tenreyro told BBC News that the UK's process of managing its debts stands out among major economies. "As you know, the UK has already started the consolidation process and it is the country that basically stands out, along with India," she said at the launch of the World Economic Outlook.
The IMF said the UK is one of the only major economies on course to stabilise levels of national debt. It projects the UK will reduce its annual borrowing by nearly four percentage points of GDP from 2025 to 2031, significantly more than the rest of the G7, many of which are increasing their deficits over that period. The UK is also projected to have the lowest annual borrowing in the G7 in 2031, and the longest maturity of debt, locking in lower rates for longer.