UK growth upgraded but energy prices and rates to bite in 2027
Summary
The International Monetary Fund (IMF) has raised its forecast for the UK economy’s growth in 2026 to 1.3%, up from 1%, but expects growth to slow in 2027 due to higher energy prices and interest rates. The IMF also predicts the UK will reduce its borrowing sharply over the next five years and have one of the lowest deficits among major economies.Key Facts
- The UK economy is expected to grow 1.3% in 2026, higher than earlier forecasts.
- Growth is predicted to slow to 1.2% in 2027 because of rising energy costs and interest rates.
- The IMF says the UK will have the lowest annual borrowing rate among G7 countries by 2031.
- The UK’s public deficit (the gap between spending and tax income) is expected to be the smallest among G7 nations by 2031.
- The IMF highlights that global economies have been resilient despite energy price shocks from the US-Iran conflict but warns the situation remains uncertain.
- Chancellor John Healey is preparing a Budget to help households and manage government borrowing amid higher costs.
- Inflation in the UK is expected to average 3.3% in 2024 and remain above the Bank of England’s 2% target at 2.8% in 2027.
- The Bank of England predicts inflation may rise above 4% early next year, increasing the likelihood of interest rate rises.
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