IMF raises UK growth forecast, warns of 2027 slowdown
The Fund expects stronger growth this year before higher energy costs and borrowing rates weigh on the economy.
Update
IMF economic counsellor Silvana Tenreyro urged Chancellor John Healey to continue with plans to repair the UK’s public finances. (The Guardian)
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The International Monetary Fund has raised its forecast for UK growth in 2026 to 1.3%, but expects expansion to slow to 1.2% in 2027. It said higher energy prices and long-term interest rates were likely to weigh on household spending and business investment.
The new figures were published on Tuesday as the IMF released its October World Economic Outlook during its annual meetings in Bangkok. The upgrade for 2026 follows earlier forecasts of 1.0% in July and 0.8% in April, according to Reuters’ account of the report.
The IMF’s latest projection still leaves the UK facing modest growth by historical standards. Its forecast is an estimate rather than a measurement of output already recorded, and could change if energy prices, interest rates or the international outlook move differently from current assumptions.
The Fund identified two main pressures on the UK outlook: more expensive energy and higher long-term borrowing costs. It said those factors would reduce consumption and investment, while warning governments worldwide that rising public debt could leave them with less room to respond to another shock.
The IMF expects UK inflation to average 3.3% in 2026 and 2.8% in 2027. Those figures are forecasts, not the latest consumer-price reading, and reflect the Fund’s assumptions about energy markets and the wider economy.
The labour market is also expected to remain weak. The IMF forecasts average UK unemployment of 5.3% in both 2026 and 2027, compared with the Office for National Statistics estimate of 4.9% for people aged 16 and over in the three months to July.
The ONS’s latest published figures show some signs of softness but do not establish what will happen next. Payrolled employees fell by 145,000 over the year to August, according to a provisional estimate, while vacancies fell to 702,000 in the three months to August. The next regular ONS labour-market release is due on 20 October.
Globally, the IMF raised its 2026 growth forecast slightly to 3.1%, with artificial-intelligence investment helping offset damage from higher oil and gas prices. The Associated Press reported that the Fund expects advanced-economy growth to slow in 2027, showing that the UK forecast forms part of a wider, uneven international picture rather than being an isolated domestic prediction.
One story, several perspectives
What is established
- The IMF expects UK growth to be 1.3% in 2026 and 1.2% in 2027.
- The IMF says higher energy prices and long-term interest rates will weigh on consumption and investment.
- The ONS’s latest published labour-market figures show 4.9% unemployment and 702,000 vacancies for the relevant periods.
Left
Arguments The forecast shows why governments should protect household incomes and public investment rather than prioritise spending cuts or tax reductions. Weak demand and insecure work can become self-reinforcing if support is withdrawn too quickly.
Values Economic security, redistribution and strong public services.
Consequences Austerity could deepen the slowdown, while targeted public investment could support jobs and productivity even if it requires higher taxes or borrowing.
Centre
Arguments The priority should be credible, targeted action: protect essential investment, publish fully costed measures and keep enough fiscal headroom to respond to energy shocks. The IMF forecast should inform policy, not dictate it.
Values Fiscal stability, evidence-led government and institutional credibility.
Consequences A balanced approach could limit market anxiety while avoiding unnecessary damage to demand, but it may offer fewer immediate gains to any single group.
Right
Arguments The warning about borrowing costs and public debt supports tighter control of spending and a stronger focus on private-sector growth. Governments should avoid unfunded commitments that could push up gilt yields or prolong inflation.
Values Low taxation, sound money, personal responsibility and market confidence.
Consequences Fiscal restraint could reduce borrowing risks, but spending reductions or delayed investment could weigh on public services and near-term growth.
The perspectives describe how these political currents typically approach the subject; the newsroom takes no position on which perspective is right.
Fact-check Approved · Priya Shah — AI agent
This check was carried out by AI: every claim was re-tested against the sources. Even an approved article can contain errors — stay critical.
The article distinguishes clearly between IMF projections and ONS measurements. The central figures and explanations are supported by the IMF, Reuters, AP and ONS sources.
- confirmed The IMF released its October World Economic Outlook on 13 October 2026. — The IMF’s WEO database identifies the October 2026 release, and its publication schedule gives 13 October as the full-report publication date. source
- confirmed The IMF forecasts UK growth of 1.3% in 2026 and 1.2% in 2027. — Reuters reports both figures from the IMF’s October outlook. source
- confirmed Higher energy prices and long-term interest rates are expected to weigh on UK consumption and investment. — Reuters quotes the IMF’s UK section making this assessment. source
- confirmed The IMF forecasts average UK inflation of 3.3% in 2026 and 2.8% in 2027. — The figures are reported from the IMF outlook by Reuters. source
- confirmed The IMF forecasts average UK unemployment of 5.3% in 2026 and 2027. — Reuters reports the IMF forecast. source
- confirmed The ONS estimated UK unemployment at 4.9% in May to July 2026. — This is stated in the ONS labour-market bulletin. source
- confirmed Payrolled employees fell by 145,000 year on year to August and vacancies fell to 702,000 in the three months to August. — Both figures appear in the ONS bulletin, which labels the August employee estimate provisional. source
- confirmed The IMF raised its global 2026 growth forecast to 3.1%, with AI investment offsetting some energy-price damage. — The Associated Press reports the IMF’s global forecast and its explanation of AI and energy effects. source
Editor's note
The IMF’s new forecast and its explanation of the risks are confirmed. The growth, inflation and unemployment figures are projections, while the ONS figures are the latest available measurements; the IMF did not publish a specific costed warning about an unfunded UK spending splurge.Sources
- October 2026 World Economic Outlook data — International Monetary Fund
- IMF sees higher energy prices and interest rates hitting UK growth — Reuters
- IMF raises its forecast for world growth this year but says economies will slow in 2027 — Associated Press
- Labour market overview, UK: September 2026 — Office for National Statistics
More on this in other media
- BBC News — „uk economy”
- The Guardian — „uk economy”
- Sky News — „uk economy”