According to new forecasts from the International Monetary Fund (IMF), the UK is on track to be the second fastest-growing economy among the G7 nations this year and next.
The IMF projects that Britain’s economy will expand by 1.3 per cent in both 2025 and 2026, trailing only the United States and outpacing other advanced economies such as France, Germany, Italy, Canada, and Japan.
The outlook marks a modest but notable upgrade from the IMF’s April forecast, reflecting “strong activity in the first half of 2025 and a boost from the recently announced US-UK trade deal.”
However, the IMF warned that inflation will remain the highest in the G7 over the next two years, averaging 3.4% in 2025 before easing to 2.5 per cent in 2026.
The organisation expects inflation to fall back to the Bank of England’s 2% target by the end of next year.
Chancellor Rachel Reeves welcomed the IMF’s upgrade, calling it a sign of renewed confidence in the UK economy. “But this is just the start. Too many working people still feel stuck,” she said.
Shadow chancellor, Sir Mel Stride, also described the report as “grim reading, arguing that Labour have allowed the cost of living to rise, debt to balloon, and business confidence to collapse.”
Globally, the IMF warned that the US-led trade war and soaring tariffs could slow world growth, with the effects beginning to feed into higher consumer prices.
It also cautioned that a potential AI tech bubble could trigger a market correction similar to the dot-com crash of 2000–01.
The Fund’s projections come ahead of the annual IMF and World Bank meetings in Washington, where global finance ministers and central bankers will discuss economic resilience amid mounting trade and geopolitical tensions.
